Binance erred in delisting Monero, ZCash, and other privacy coins.

Binance announced in May that it would remove “privacy coins” such as Monero (XMR), Zcash (ZEC), and others from several countries, including France, Italy, Spain, and Poland. This decision highlights the reality that some companies may ban privacy technology, even where it is legal and out of a combination of risk aversion and compliance confusion. Some Monero users advocate for keeping their tokens off exchanges, stating that on-exchange transactions undermine user privacy by requiring personal identification data. However, listing privacy coins on exchanges has its merits: it facilitates new user adoption, bolsters liquidity, and contributes to price momentum. Recently, European Union regulators enacted two significant crypto legal frameworks: Markets in Crypto-Assets rules and a Travel Rule. These mandates necessitate the collection of user data and identification information for withdrawal recipients. While these regulations might seem burdensome, privacy coin users and exchanges listing privacy coins can comply. Binance’s overreaction is not a result of any clear regulatory mandate, and its actions also seem internally inconsistent. It delisted Secret’s SCRT governance token, which is not private itself but can be traded for a private coin. In contrast, Litecoin (LTC), which has a privacy feature, has not been delisted. These actions from Binance might be less about European regulators’ demands and more about its unique circumstances. For instance, Binance is currently embroiled in a legal dispute with the Commodity Futures Trading Commission over alleged failures to uphold requisite Anti-Money Laundering measures. Even in countries where privacy coins are banned outright, like the United Arab Emirates, savvy users can acquire them via virtual private networks to access peer-to-peer transfers or decentralized exchanges. Platforms like Sideshift.ai for Zcash and Bisq for Monero serve as gateways to these privacy coins. The crypto industry should avoid creating its version of “Operation Choke Point,” a practice where the U.S. government discourages banks from doing business with crypto clients due to regulatory pressures. Crypto exchanges should refrain from banning privacy coins when there’s no legal obligation to do so, lest they create their own chokepoint. Privacy tools in crypto are just that—tools. They are used by both everyday users and, in some cases, bad actors. But this doesn’t mean the tools themselves are inherently bad. Just like cash or the internet, these tools can be used for both legal and illegal activities. It’s important to differentiate between the tool and how it is used. The crypto industry is still in its early stages, and it’s crucial to establish a balanced regulatory environment that respects users’ privacy while also deterring and punishing illegal activities. Overly restrictive regulations could stifle innovation and discourage new users from joining the crypto space. On the other hand, a complete lack of regulation could make the crypto space a haven for illegal activities. Privacy is a fundamental human right and an essential aspect of the crypto ecosystem. Regulatory bodies and crypto organizations should work together to create a regulatory environment that respects and protects user privacy while also ensuring compliance with laws and regulations. This will ensure the long-term sustainability and growth of the crypto industry. Binance should retract its misguided delisting of privacy coins, take a better view of its actual compliance requirements in EU countries, and, even more than that, get active in advocating against the EU’s consideration of a future privacy ban. Privacy will become increasingly important in crypto, and Binance and other exchanges will be left behind if they don’t take privacy coins and privacy tools seriously.

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