The Financial Services Commission (FSC) of South Korea, has just announced the decision to ban virtual asset service providers from hosting high-risk assets such as privacy or ‘dark’ coins. Furthermore, the FSC is imposing new requirements on exchanges, requiring full compliance with KYC/AML measures, and more stringent reporting obligations.
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This is not the first example of a regulators assault on such assets. Over the past few years we have seen other nations take different approaches towards cryptocurrencies which place an emphasis on privacy – albeit with the same goal of controlling them.
Regulators in Japan were some of the first to officially clamp down on privacy coins. Spurred into action from the infamous CoinCheck hack, the Japanese FSA banned digital assets which facilitated anonymity in 2018. They contended that privacy coins were used to help launder the stolen funds.
Although not currently banned in the United States, the status of privacy coins remains in regulatory limbo in the eyes of many. For the time being, the government bodies, such as the Department of Homeland Security, are attempting to develop tools which would allow the tracing of Monero transactions.
Bitcoin is not a privacy coin. Sometimes though, those not well versed with cryptocurrencies are under the impression that it is. Sure, it might provide a semblance of anonymity compared to FIAT – however those determined enough, can often sleuth out identifying data. True privacy coins don’t just protect identifying data on the surface. Rather, their usage is truly anonymous.
Simply put, there are levels of privacy within cryptocurrencies. Coins that boast little in the way of protecting privacy, those that can toggle this feature, and those that are permeated by the idea from start to finish.
Much like Bitcoin spin-offs, privacy coins are aplenty. While one of these may one day rise to be the most prominent privacy coin, it will first need to supplant the following three as the current top-options.
As indicated, each of these coins approaches privacy in different manners. For Monero, privacy is a given – unable to be turned on/off. For the other two, they provide the ability to ‘toggle’ privacy measures. While Monero still remains the most prominent coin of its type at this time, there is no clear favourite approach among users of such assets.
Privacy coins are not just used for nefarious activity. There are plenty of valid, legal reasons as to why one could/should be used.
- Unfortunately hackers are commonplace within crypto. Wealthy users of digital assets can find themselves as sitting ducks, biding their time until a hacker infiltrates their digital wallets. By obscuring wallet holdings and transactions, this risk is greatly diminished.
- One of the most valuable assets in the modern world is data. For those that recognize this, and do not wish for their financial data to be exploited by power-hungry companies, privacy coins may hold great appeal.
If these reasons aren’t enough to at least consider using a privacy coin, there is also the simple belief that everyone should be entitled to privacy. It should not be a privilege, but a right.
Unfortunately, between nations imposing bans, and others trying to make them obsolete, privacy coins find themselves in the shadows of a promising industry.
There will always be privacy coins, and places to trade them. However with access restricted to obscure platforms and exchanges, the eventual mainstream user may find that they are simply too inconvenient to use.
For the time being however, offerings like Monero, zCash, and Dash, are the best we have – and still widely supported. South Korea has always been a hub for cryptocurrency adoption, but crypto is a global industry – privacy coins will live on.