Cryptocurrency has been a hot topic in recent years, with the world slowly moving towards regulating these digital assets. However, the impact of such regulation on investors can be significant, particularly when it comes to privacy coins. The recent bans and delistings of privacy coins have dealt a blow to some of the biggest projects in the crypto space. The Markets in Crypto Assets Act (MiCA) framework in the European Union, which came into effect last year but will be enforced by the end of 2024, represents the culmination of the government's anti-privacy coin movement.
Authorities have been targeting developers of privacy protocols like Tornado Cash, Samourai Wallet, and Blender, leading to arrests and even prison sentences. Regulatory bodies and other agencies have shifted their focus to privacy coins at the corporate level. MiCA explicitly prohibits crypto service providers (including exchanges and other payment services) from having any affiliation with privacy, unless the holders can be identified. The same applies to credit and financial institutions.
This has been enough to prompt crypto exchanges operating in the EU to largely reject cryptocurrencies based on protocols with integrated privacy features. Binance, for example, delisted Monero earlier this year, after initially committing to restricting trading in EU countries last year before retracting that statement two weeks later. OKX dropped a number of privacy coins in December when they removed almost two dozen tokens from the platform, while Kraken will cease trading them in Ireland and Belgium next week after suspending trading and deposits in May. These delistings continue to be different from measures taken by other crypto platforms like Coinbase UK and Shapeshift, which began in 2018.
Other avenues for acquiring privacy coins are drying up along with their trading volumes. LocalMonero, a platform for peer-to-peer XMR sales without the need for identification verification, announced the cessation of its operations in May after nearly seven years of activity. The dominance of privacy coins has unsurprisingly decreased with each market cycle since the initial delistings in Japan.
Monero, Zcash, and a few others peaked in mid-2017 - about six months before crypto reached about 5% of the total market during the ICO boom. Today, they represent less than half a percent of the crypto market. Monero (XMR) is the only privacy coin currently in the top 100 and the only one with a market capitalization of over $1 billion.
The transition from limited regulation to stricter rules will be uncomfortable for companies trying to navigate the rules with little to no disruption, especially since this affects a smaller segment of the overall crypto market. Nonetheless, MiCA will set the tone for how crypto is regulated in the EU, where companies are not subject to the same enforcement regulations as US companies.
Cryptocurrency regulation is a double-edged sword. While it can provide a framework for legitimacy and consumer protection within the industry, it can also stifle innovation and hinder the original vision of financial freedom that many in the crypto space aspire to achieve. The clash between regulations and privacy coins in the EU exemplifies this delicate balance between oversight and freedom in the crypto landscape.
-
-
-
-
