On Thursday, Binance issued a warning that it might soon delist 10 prominent privacy coins, including Monero, Zcash, and Horizen, citing regulatory concerns.
In a statement, Binance explained that these tokens have received a “monitoring tag” and could potentially fail to meet listing requirements related to team commitment, network security, trading volume, and other factors.
“Tokens with the Monitoring Tag exhibit notably higher volatility and risks compared to other listed tokens. These tokens are closely monitored, with regular reviews conducted,” Binance stated. “Keep in mind that tokens with the Monitoring Tag are at risk of no longer meeting our listing criteria and being delisted from the platform.”
The announcement immediately impacted prices, with Monero falling by 5% and Zcash by 12% in the past day, according to CoinMarketCap data.
Regulators Raise Concerns Over Privacy Coins’ Anonymity
Privacy coins enable users to conceal wallet balances, transaction details, and other information, which has drawn increased scrutiny from global regulators concerned about potential illicit usage.
In response to regulatory pressures, last year, Binance announced its intention to remove privacy coins to comply with European laws. Critics have suggested that the recent warnings are connected to the ongoing heightened regulatory attention in the crypto space.
Binance has now implemented a requirement for traders of these tokens to pass periodic quizzes on risks, a move that some interpret as another attempt to discourage usage in response to compliance pressures.
“The monitoring tag has been placed on FIRO along with other privacy coins due to increased regulatory pressure, including from MiCA, recent initiatives from U.S. regulators and compliance to Binance’s settlement with the U.S. DoJ,” stated Firo co-founder Reuben Yap in an interview with The Block.
Loss of Exchange Access Harms Liquidity and Discoverability
Last week, rival exchange OKX also disclosed its plans to delist major privacy coins, Zcash and Monero, by January 5, stating that these assets no longer align with their listing standards.
Centralized exchanges are increasingly restricting or delisting privacy tokens due to regulatory concerns. However, users who wish to trade privacy coins still have options.
Decentralized platforms like Uniswap provide access without requiring Know Your Customer (KYC) processes. Platforms like Bisq and LocalMonero operate without controlling user funds. Despite these alternatives, the trading volumes on decentralized platforms remain considerably lower than those on larger centralized exchanges.
Advocates Clash With Regulations on Anonymity
Privacy coin advocates, including organizations like the American Civil Liberties Union, argue that financial anonymity is a human right, offering protection from surveillance, identity theft, and other risks.
On the other hand, regulatory bodies such as the SEC contend that the lack of transparency inherent in privacy coins facilitates criminal activities. Authorities have raised concerns about privacy coins in various high-profile cases involving ransomware, theft, illegal drug sales, and terror financing.
In 2023, the IRS criminal investigation division offered a reward of up to $625,000 for tools to analyze privacy coin transactions and trace their owners.
The ongoing debate revolves around finding the right balance between individual privacy and providing law enforcement with the necessary tools for investigation. Despite this, recent actions by major centralized trading platforms like Binance and OKX suggest a turning regulatory tide against anonymous cryptocurrencies, at least in terms of their availability on these platforms.
