- Regulators are cracking down on Monero, which emphasizes privacy.
- This cipher is popular among both privacy advocates and villains.
- Monero supporters say adoption is the best way to reverse this trend.
This year's Bitcoin financialization boom signals growing acceptance of the cryptocurrency among multitrillion-dollar financial institutions and lawmakers.
But at the same time, some have taken a more hostile stance toward another asset, the $2.8 billion privacy-focused cryptocurrency Monero.
“Regulators need a boogeyman, and Monero is that boogeyman,” said Riccardo Spagni, Monero's former chief administrator. DL News. Bitcoin's widespread acceptance has led regulators to criticize other crypto assets, Spani said.
In Europe, regulators are considering banning anonymity-enhancing cryptoassets like Monero. Several crypto exchanges, including Binance, OKX, and Kraken, have delisted Monero in multiple, if not all, jurisdictions this year.
reason? Unlike most other crypto assets, Monero cannot be traced unless users are lax about their security.
Monero's privacy efforts have earned it a cult following among privacy advocates and those distrustful of government. But it also means it's popular with criminals and money launderers, and as the go-to currency for darknet markets.
Framing problems
There are many examples of Monero being used by criminals, making it easy for regulators to take a hard line.
In October, Japanese authorities arrested 18 people on suspicion of money laundering using Monero. In 2022, a US nuclear engineer and his wife were arrested for trying to sell secret nuclear propulsion technology to third countries. They requested payment in Monero.
Join our community for the latest stories and updates
North Korean crypto criminal groups have also been observed using Monero to break traceability of stolen assets.
Supporters argue that Monero should not be banned simply because it is used by criminals.
For example, U.S. criminals frequently use the Postal Service in their crimes, Spani said. However, authorities do not have the right to open and search mail without a warrant or probable cause.
Bitcoin was also once the most popular currency on the darknet market Silk Road. Currently, BlackRock, the world's largest asset manager, has issued $47 billion in exchange-traded funds for this asset.
“This is like describing encryption as a way for criminals to pass secret messages, but also as something that protects your internet connection,” Spani says.
some additional steps
Exchanges may have delisted Monero to shield it from regulatory scrutiny, but it would not significantly impede access to the asset.
Monero buyers can first purchase other crypto assets such as Bitcoin or stablecoins and then exchange them for Monero within a non-custodial crypto wallet like Cake.
said Seth, Cake's vice president of operations. DL News Over the past year, he has seen an influx of users bringing cryptocurrencies other than Monero to Cake. Seth did not give his full name to protect his anonymity.
“Almost always, the majority of trading volume is people exchanging from other cryptocurrencies to Monero,” he said.
“If you use this, you can win.”
While the new crackdown did not stop users from accessing Monero, it threw the future of the cryptocurrency into uncertainty.
All it takes is one high-profile incident of criminals using Monero to trigger a more severe backlash from regulators.
Supporters say the only way Monero can avoid such a situation is through adoption.
Anthony, a prominent Monero supporter, said that if Monero adoption increases in the same way Bitcoin adoption has increased since 2017, it will be much harder for regulators to police Bitcoin. Ta. DL News. He did not give his full name to protect his anonymity.
“With this, we can win,” Anthony said, repeating a phrase popularized by Monero podcast host Douglas Tuman.
Tuman said. DL News He sees Monero adoption growing.
He gave the example of CoinCards, a site that allows users to purchase gift cards using cryptocurrency. In July, purchases using Monero exceeded Bitcoin for the first time.
Shopinbit, another site that allows users to purchase goods privately using cryptocurrencies, also saw Monero become the most popular cryptocurrency by purchase volume this year.
“When people want to use cryptocurrencies in a digital cash-like way, they are using Monero,” he said.
Although still niche, these use cases for Monero are closer to the digital cash system that many early crypto proponents expected Bitcoin to be used for.
Monero could take on Bitcoin's role as Wall Street reevaluates Bitcoin as an investment asset and high transaction fees deter people who want to use it as digital cash.
Streisand effect
But the question remains why regulators don't just ban Monero outright, rather than encourage exchanges to delist Monero.
“They can just publicly say that Monero is illegal,” Seth said. “But they don't, because I think that causes the whole Streisand effect.”
“What's going to happen is that people who don't want to be monitored by the government will flock to Monero,” Seth said.
Although Monero's future is becoming increasingly uncertain, the community remains optimistic.
Anthony said that as long as there is still a way to migrate from Bitcoin and other crypto assets to Monero, they are still winning.
Tim Craig is DL News' DeFi correspondent based in Edinburgh. To get tips, tim@dlnews.com.
