On Dec. 8, Dutch cryptocurrency exchange LiteBit sent an email to its users stating it would be delisting the privacy coin firo (formerly zcoin).
According to the email, the decision was made “partly due to the privacy aspect of this crypto. The regulator of crypto companies in the Netherlands has indicated that cryptocurrencies aimed at privacy are too high a risk.”
LiteBit confirmed zcoin will be delisted on Dec. 22.
This news comes a few months after Shapeshift delisted monero, zcash and dash. South Korea-based exchange Bithumb also dropped monero in June, continuing a trend of delisting privacy coins by cryptocurrency exchanges that seems unlikely to stop anytime soon.
“At the moment, the impact is primarily limited to smaller or regional exchanges” said Firo project steward Reuben Yap. “However, it signals to the rest of the space that delisting is the only way to remain compliant with AML/KYC [know your customer/anti-money laundering], which isn’t the case at all, setting a bad precedent.”
Delisting around the world
Yap said delistings have become a worldwide trend, especially in Asian countries such as South Korea and Japan. Europe, where privacy regulations like the General Data Protection Regulation (GDPR) would seem more open to privacy-focused coins, has seen France’s finance committee recommending bans on privacy coins. Recently, new Dutch AML regulations have created perceived barriers for privacy coins, focusing on knowing who are all parties in a cryptocurrency transaction. Monero has already been delisted in the Netherlands.
In Australia, cryptocurrency exchanges are delisting privacy coins amid regulatory and banking pressure. The blockchain analysis firm Chainalysis is believed to have played a large part in the decisions made by Australia and others.
The U.S. Secret Service has urged Congress to create ways to limit the use of privacy-focused cryptocurrencies.
“Delisting is one of the easiest responses for small, compliant cryptocurrency exchanges,” said Justin Ehrenhofer, a Monero contributor. “They may not have the resources to properly communicate their risk mitigation strategies to regulators and banks.”
In most cases, banks, exchanges and other entities find it simpler to completely write off products related to specific coins rather than expend resources creating detailed compliance programs, according to Ehrenhofer.
Why cryptocurrency exchanges delist privacy coins
The core reasons behind these delistings are the privacy features that are important to many cryptocurrency users. Bitcoin’s cypherpunk origins were in part about escaping the ties of the financial system and the surveillance and scrutiny it enables.
But regulators have seen those features as conflicting with AML and KYC regulations.
“Many countries’ official reasoning is that these bans and delistings would help combat money laundering and illicit use of cryptocurrencies. However, this seems more like a facade,” said…