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Crypto Exchange OKEx Delists Five Privacy Coins due to FATF Rules

Cryptocurrency exchange OKEx’s Korean arm will be delisting all five privacy altcoins including Monero (XMR), Dash (DASH), Zcash (ZEC), Horizen (ZEN), and Super Bitcoin (SBTC).

Announced by OKEx Korea on Monday, due to new international regulations, the support for transactions for the five altcoins will be ending on October 10, while withdrawal services will continue until December 10.

The decision to delist the five altcoins has been made considering that the coins violate the “travel rule” of the Financial Action Task Force (FATF).

As the five altcoins focus on privacy, the coins do not fulfill the requirements under the “travel rule” of the crypto guidelines issued by the FATF, which requires exchanges to collect and transfer customer information during transactions.

The customer information includes location information, the beneficiary, and the originator’s name, and account numbers. The privacy coins do not allow the collection of this information; therefore, the support must end for the five altcoins.

Currently, it still remains unclear whether these restrictions will be applied globally for the exchange.

Image via Shutterstock

Chainalysis Adds Compliance Support to Track Privacy Coins Dash and Zcash

Chainalysis has just launched support for two of the most popular privacy coins, Dash and Zcash. Privacy coins are cryptocurrencies with privacy-enhancing features that allow users to gain total anonymity when making blockchain transactions.

Privacy coins protect the identity of the users and the origins of the transactions, taking the anonymous and private nature of Bitcoin to the next level. Comparatively, Bitcoin protects some information, hence remaining pseudo-anonymous. The rest of the information, including transactions, addresses, and balances, is recorded in a public and permanently available ledger.

With around 63 different privacy coins in the cryptocurrency market, each project tries to offer the best approach to privacy, however, five projects overshadow the rest. These include Monero, Dash, Zcash, Verge, and Bitcoin Private.

Although privacy coins are known to be used for illicit purposes, research by the RAND corporation mentioned that 0.2 percent of all the cryptocurrency addresses mentioned on the dark web was either for Dash or Zcash.

Dash

Dash is a fork of the original Bitcoin code, similar to many other altcoins. Launched in 2014, Dash is a combination of the words digital and cash and is considered the first-ever privacy coin in the crypto history.

Dash uses an anonymization strategy revolving around PrivateSend, which hides transactions by mixing them together as a single transaction, which is then added to the blockchain.

Although Dash is known for its privacy features, only 9 percent of all Dash transactions make use of mixing transactions related to PrivateSend. This portion of Dash transactions take up a relatively small and declining percentage of Dash transactions, according to Chainalysis.

Zcash

Zcash uses an anonymity tool called Zero-Knowledge Proof, which allows users to transact with each other without revealing addresses to anyone. These transactions on the Zcash network are verified, using zk-SNARKS, also known as Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.

Launched in 2016, Zcash (ZEC) also allows the encryption of blockchain activity, known as shielding, and Zcash provides this using shielded pools. Of the transactions that interact with a shielded pool, only 6 percent is completely shielded, and around 14 percent of all Zcash transactions involve shielded pools.

Chainalysis claims that it can provide the transaction value and at least one address for over 99 percent of ZEC activity.

Coinbase CEO Defends Decision to License Analytics Platform to US Secret Service

CEO of Coinbase Brian Armstrong sold his blockchain analytics software to US Secret Service, and addressed any worries investors might have concerning privacy issues.

Coinbase Analytics, the crypto firm’s proprietary blockchain analytics software, has been licensed out to the US Secret Service. As a specialized branch of the US Department of Homeland Security, the US Secret Service has been focusing more on cryptocurrency laundering and attempting to eliminate illicit cyber-criminal operations. As cryptocurrencies are currently on the rise, so are money laundering activities.

Is Coinbase Trustworthy Without its Analytics Software?

Coinbase CEO Armstrong took to Twitter to justify his decision to sell Coinbase Analytics blockchain software to the US government and attempted to appease Coinbase customers, who have voiced their concerns regarding their personal data. Armstrong said that regardless of his company’s decision to lease the software or not, people could still trace others’ transactions on a public blockchain. If investors were concerned with privacy, they should simply switch to privacy coins.

Why Sell Coinbase Analytics?

Armstrong also defended his decision of selling the blockchain analytics software by expressing his desires to recover his costs, stating that it is quite expensive to maintain an analytics platform. He also went on to advocate for the benefits of Coinbase Analytics and explained that it was a good platform that could be used to encourage fiat money and cryptocurrency interactions. Taking to his Twitter account, Armstrong explained:

“Exchanges that maintain connections into the existing financial system (i.e. ability to connect your bank account, do wires, etc so you can convert fiat to crypto) need to follow Anti-Money Laundering (AML) laws, and this often includes utilizing blockchain analytics software for transaction monitoring.”

Armstrong added that there are improvements still left to be desired of AML laws, but that cryptocurrency investors must nevertheless adhere to them in order to operate a fiat to crypto exchange legally.

Coinbase CEO Brian Armstrong

The Coinbase CEO has taken it upon himself in the past to educate his growing crypto fanbase, preferring to engage with his audience via blogs and platforms, as opposed to talking directly to journalists. He does however add that there are credible journalists out there, but believes that the best strategy in creating impact among the crypto community is to build a network comprised of a handful of respected journalists and to resort to modern social platforms the majority of the time.

South Korea’s Financial Services Commission to Ban Privacy Coins from Exchanges

South Korea’s Financial Services Commission (FSC) will ban privacy-centric digital assets or “dark coins” from crypto exchanges as they present a high money laundering risk.

Virtual asset providers in South Korea will no longer be authorized to handle privacy coin transactions according to a Nov.3 announcement from the FSC.

According to the announcement, the updates to the regulation for exchanges were updated in the Special Payment Act, which is specific regulation pertaining to the legal status of cryptocurrency—as such privacy coins or “dark coins” will be banned as they present too high a money-laundering risk.

The FSC’s new amendment to the Special Payment Act highlights privacy-oriented cryptos or privacy coins—referred to as dark coins in the announcement—which are designed to protect the identity of the user transacting. The effects will likely impact popular privacy coins like Monero (XMR), Zcas (ZEC), and Dash (DASH).

The FSC’s amendments are anticipated to be in effect by March 2021 and calls for exchanges to take accountability and leverage effective anti-money laundering (AML) and Know Your Customer (KYC) policies.

South Korean exchanges are obligated to report their operations within six months of the law coming into effect and will be required to confirm and verify the real names of their customers.

Due to existing international regulations around privacy coins, many crypto exchanges in South Korea already do not list “dark coins”. In September 2019, cryptocurrency exchange OKEx’s Korean arm delisted five privacy altcoins including Monero (XMR), Dash (DASH), Zcash (ZEC), Horizen (ZEN), and Super Bitcoin (SBTC) in compliance to the “travel rule” of the Financial Action Task Force (FATF).

ZCash Celebrates First Halving, Unveils Canopy The Network's Fifth Upgrade

ZCash has undergone its first-ever halving, an event that coincides with the launch of Canopy, the fifth network upgrade for the ZCash privacy coin protocol.

As announced by the Electric Coin Company, the tech company behind the development of the ZCash privacy coin, the first halving was activated at block 1046400, more than four years when ZCash was first mined on October 28, 2016.

The first halving event of ZCash which comes after Bitcoin’s fourth halving event reduces the reward that goes to the network’s miners in order to reduce the rate at which the coin is mined. Following this halving event, the reward that goes to miners is now reduced from 12.5 ZEC per block to 3.5 ZEC per block according to nicehash.

The halving event as noted earlier also coincides with the launch of the network’s fifth upgrade ‘Canopy’. With Canopy comes unique changes to the network most notably the removal of the controversial Founder’s Reward and ushers in the creation of a new development fund. The developed fund is targeted at enticing new community members who wish and have the capabilities to improve, build upon, extend, and support Zcash.

ZCash Seen as a Threat, Can Canopy Make a Difference?

The privacy model of ZCash has constantly attracted backlash from regulators around the world. Recently, Europol identified ZCash among a list of other privacy coins as an emerging threat in cybercrime. Due to its private nature, cybercriminals are more likely to demand payment using ZCash as such transactions are untraceable.

Besides the threats seen by Europol, the US Internal Revenue Service continues to devise means to deanonymize ZCash and Monero in a bid to prevent cybercrime. With the backlash that surrounds ZCash, the rollout of the Canopy network upgrade by the Electric Coin Company, aims at building the network’s transparency within its community.

Whether the network upgrade will have much impact on the authorities’ perception of the potential threat of ZCash remains unclear.

Image source: blockchain.news

Kraken to Delist Monero in UK as Crackdown on Privacy Coins Takes a New Twist

American digital currency trading platform Kraken has shared details of its plans to delist privacy coin Monero (XMR) in the United Kingdom by the end of November 2021, as exchanges scramble to adhere to local regulations.

According to Kraken, when the delisting starts, users will not be able to increase their margin position on Monero, but however, they will be able to decrease it.

The exchange said users will not be able to fund their Monero balances from November 26, and all open margin positions will be liquidated while open orders will be cancelled. The new update is based on local regulations and Kraken said its customer helpline will be available to guide users to understand its position while also helping them in liquidating their positions.

“We appreciate your understanding and we apologise for any inconvenience caused. Should you have any questions, please do not hesitate to contact our support team,” the Kraken team said in a statement.

Monero is one of the pioneering privacy coins that extended the cryptographic features of blockchain technology to a whole new level. While it is possible to determine or track transactions of bitcoin and other altcoins, Monero and other privacy coins are completely shielded from prying eyes.

Privacy puts these digital tokens under scrutiny by government authorities as it can avoid all forms of monitoring, hence reducing the likelihood of subjecting their transactions to taxation. Lately, several national tax authorities around the world are paying extra attention to cryptocurrency taxation, and other the UK, many other countries are likely to show a high level of intolerance to Monero and other coins in its cohort.

The delisting of Monero on Kraken is the first of its kind for the US-based trading platform and may mark a precedent for many other exchanges to follow in the near future.

Finland Tracks Monero in High-Profile Cybercrime Cas

The ongoing criminal trial of Julius Aleksanteri Kivimäki in Finland has been marked by significant developments involving cryptocurrency tracking. Kivimäki stands accused of hacking into the database of Vastaamo, a private mental health firm, and demanding ransom payments in cryptocurrencies. This high-profile case has brought to light the complexities of dealing with crimes involving digital currencies, especially those designed for privacy.

In October 2022, Kivimäki allegedly demanded a ransom of 40 Bitcoin, approximately 450,000 euros at the time, threatening to release records of over 33,000 patients from Vastaamo. When his demands were not met, Kivimäki reportedly targeted individual patients. The Finnish National Bureau of Investigation has played a pivotal role in tracing the Monero transactions connected to this case, a notable achievement given Monero’s reputation for strong privacy features, including Ring Confidential Transactions and stealth addresses.

Investigators found that Kivimäki received payments in Bitcoin, then transferred these funds to an exchange that did not adhere to Know Your Customer (KYC) guidelines. He subsequently converted these funds to Monero and moved them to a dedicated Monero wallet. Interestingly, it appears that the funds were later transferred to Binance, converted back to Bitcoin, and then distributed to various wallets. However, the authorities have maintained confidentiality regarding the specifics of their on-chain analysis.

This case underscores the challenges law enforcement faces in tracking transactions involving privacy-focused cryptocurrencies like Monero, which are designed to be untraceable and anonymize users completely. The ability to follow the crypto trail in this instance is significant and might set a precedent for future investigations involving privacy coins.

The case of Julius Aleksanteri Kivimäki highlights the evolving landscape of cybercrime, where digital currencies play a central role, and the ongoing efforts by law enforcement agencies to adapt and respond to these challenges. The implications of this trial extend beyond the immediate case, touching on broader issues of cryptocurrency regulation, privacy, and the balance between individual freedoms and the need for security and law enforcement efficacy.