Japan’s chief financial regulator is pressuring cryptocurrency exchanges in the country to stop listing popular privacy coins such Monero and Zcash, due to concerns about their use by cybercriminals, according to a new report.
Japanese Regulator Applies Pressure on Exchanges over Privacy Coins
Journalist Jake Adelstein reports in Forbes that authorities at Japan’s Financial Services Agency (FSA) believe that privacy coins such as Monero (XMR), Zcash (ZEC), and Dash (DASH), which conceal transacting parties and amounts, are being used by criminals for money laundering, dark web marketplaces, or facilitating ransom payments.
Japanese authorities believe that the encryption technology used by the privacy coins makes it nearly impossible to track users, putting them outside the control of financial and law enforcement agencies. Adelstein’s sources told him that during a meeting sanctioned by the FSA on April 10th, a virtual currency expert stated that “It should be seriously discussed as to whether any registered cryptocurrency exchange should be allowed to use such currencies.”
The creator of Monero, Riccardo Spagni, didn’t miss the news and tweeted his reaction:
First they came for Monero, and I did not speak out –
Because I was not a Monero holder.
Then they came for ZCash, and I did not speak out –
Because I was not a ZCash holder.
Then they came for Bitcoin – and there was no one left to speak for Bitcoin.
— Riccardo Spagni (@fluffypony) April 30, 2018
Currently, Monero, Zcash, and Dash can be legally traded on exchanges in Japan. However, it’s possible that Japanese exchanges, which are in the process of creating a self-regulatory body, could choose to voluntarily stop listing privacy coins. One at least has already done so: the Coincheck exchange dropped the trading of Monero, Zcash, and Dash in March after being hacked in January. That came after the FSA handed out 30-day suspensions to two other exchanges in early March.
What Does the Future Hold for Crypto Anonymity?
The moves by Japanese authorities do raise the question of the tensions between an individual’s ability to keep their financial life private and legitimate government oversight. While bitcoin is slowly gaining a level of acceptance from authorities, information on its public ledger can be seen by anyone. Determined investigators can trace transactions back to individual users, and private companies are building tools to assist them: Amazon’s “streaming data marketplace” patent and Bitfury’s Crystal are two recent efforts towards this end.
But privacy coins are on the radar of authorities around the world. In October 2017, the European Union’s law enforcement agency Europol warned in a report about the use of privacy coins for criminal purposes, saying that:
“While Bitcoin remains a key facilitator for cybercrime, other cryptocurrencies such as Monero, Ethereum and Zcash are also gaining popularity within the digital underground.”
The London Metropolitan Police has also mentioned Monero as being used for illicit transactions online.
However, it is unclear how successful the FSA or other watchdogs will be in stopping anonymous crypto transactions. While removing privacy coins from exchanges would make it less convenient to acquire them, there are other ways to keep transactions private. Ethereum has tested private transactions, while Bitcoin currently has coin tumbling services that lend some coin fungibility. And eventually, the Bitcoin protocol itself may eventually add privacy features. Additionally, new privacy coins are being created, such as the recent announcement of a new Bitcoin and ZClassic (ZCL) fork called Anonymous Bitcoin. Crypto anonymity is an issue that will likely grow over time as cryptocurrencies gain more mainstream acceptance.
Have your say. Do you favor the permitted use of privacy coins or is the industry better off without them?
Images via Pxhere
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