Ordinary and, moreover, confidential cryptocurrencies are under close supervision by the regulator. How do anonymous coins and law coexist?

Anonymous coins and law

Recently, there has been more and more talk about the deanonymization of cryptocurrencies and the widespread introduction of an identity verification procedure. 

Initially, the identity verification procedure on the exchanges was completely voluntary. Today, many states, in case of suspicion of criminal activity, oblige cryptocurrency exchanges to provide information about their customers.

Thus, according to the authorities, the fight against money laundering is being conducted. Therefore, the identity verification procedure is included in the set of actions against money laundering, that is, “AML” (Anti Money Laundering – countering money laundering).

Although it is worth noting that in some cases the interest of special services in persons associated with cryptocurrency transactions is justified. For example, if the user cashes out large amounts through a bank or various electronic payment systems. Also if the user’s wallet is involved with wallets that have been seen in cybercrime, money laundering or terrorist financing.

The financial regulator has a negative attitude towards  anonymous cryptocurrencies. Therefore, more and more centralized exchanges are delisting anonymous coins. South Korea also prohibits the trading of confidential coins on the country’s cryptocurrency exchanges. All this is done as part of the fight against terrorism and money laundering.

So, in 2019, the Urbit and CoinBase exchanges and the South Korean division of the OKEx exchange stopped supporting the Zcash coin. In the same 2019, the Bithumb, OKEx, Urbit and Bitbay exchanges delisted the Monero coin. In 2020, the ShapeShift exchange delisted Monero, Zcash and Dash. In 2021, the Bittrex exchange announced the delisting of such popular anonymous coins as Monero, Zcash and Dash.

However, Chainalysis researchers have found that Dash and Zcash coins can hardly be called completely anonymous due to the technologies used. Also, these coins can be tracked for criminal use. In addition, most of these coins are used by users for regular rather than anonymous transactions.

Conclusion

So, anonymous coins are gaining more and more popularity among crypto enthusiasts. The authorities of different countries and financial regulators, in turn, are trying to take control of this sector. The sphere of digital assets is still very young, but it is very actively spreading in our daily life. Therefore, the authorities have yet to regulate the coexistence of anonymous coins and the law.