Monero and Zcash liquidity dries up as Binance looks to delist privacy coins – DL News

The privacy coin is sinking.

Cryptocurrencies such as Zcash and Monero are being squeezed out of the market as one exchange after another moves to remove the assets from trading.

On January 5th, the virtual currency exchange OKX delisted several major trading pairs due to privacy concerns, stating that they did not meet our listing standards.

Last week, Binance added so-called surveillance tags to Monero, Zcash, Firo, and MobileCoin, indicating that these tokens may also be delisted.

“Tokens with monitoring tags no longer meet our listing criteria and are at risk of being delisted from the platform,” the exchange wrote.

According to a report on Reddit, Binance's lending program has already been implemented and XMR has been removed from the list of available assets.

A quick scan of Binance confirms these reports. The exchange first added XMR as a collateral asset in May 2022.

frightened investors

Although the delisting was not formal, it still spooked investors.

Zcash is down about 19% over the past week, while Monero is down about 3%.

Liquidity in privacy coins like Monero (XMR) and Zcash (ZEC) has fallen to an all-time low, according to new data from analysts at Kaiko.

“Most companies would not want to engage with privacy coins given the negative connotations,” said Clara Medary, research director at Kaiko. DL News.

“Many exchanges have delisted privacy coins, suggesting that market makers do not want to provide liquidity.”

Privacy coins can obscure a user's identity by hiding sender details and transaction history.

As such, they are notoriously difficult to track and are under intense scrutiny from regulators around the world.

Privacy coins, a core feature of the original crypto theory, also continue to attract the attention of many investors. Monero and Zcash have a combined market capitalization of $3.48 billion.

Experts say this position now appears to be in serious jeopardy.

serious challenge

Binance's dominance, with a daily trading volume of $15 billion, makes its actions a serious challenge to the fate of these projects.

Binance doesn't have many options. After pleading guilty in November to violating U.S. banking laws and paying a $4 billion fine, the company is being called upon to strengthen anti-money laundering measures and customer monitoring.

“Binance made it clear from the beginning that if it did not create a dedicated address type for the exchange, it would delist ZEC.”

— Jason McGee

Additionally, in negotiations over anti-money laundering regulations in the EU, lawmakers are debating whether to ban privacy coins like Monero and Zcash.

the battle has begun

There is currently an ongoing battle to prevent Binance from completely deprecating its privacy coins.

Some projects have devised novel workarounds to try to get consent from Binance.

Other companies, such as Monero, have refused to comply with Binance's demands, and community members slammed the exchange in December. Representatives for Monero did not respond to requests for comment.

See all crypto addresses

A workaround that others have tried is called an “exchange-only” crypto address.

The idea is that users who want to move funds to an exchange create a new transparent address, send private funds to that address, and then send the funds to an exchange-only address.

It was first proposed by privacy project Firo last November, and is also on Binance's cutting board. Exchange-only addresses are not private, so-called shielded addresses, and can only receive funds from transparent addresses.

“They don’t want to receive secured transactions,” said Jason McGee, a Zcash Community Grants board member and Binance contact for the project. DL News.

“Binance made it clear from the beginning (early November) that ZEC would be delisted if it did not create a dedicated address type for the exchange.”

“Binance does not want to touch any funds from unknown sources.”

— Ruben Yap

Firo project steward Ruben Yap said: DL News Binance initially asked the project to remove all privacy features. he said he couldn't do that.

According to McGee and Yap, Binance is still considering the proposed solution. They hope this will be accepted as it will allow exchanges to show the history of deposit addresses to regulators.

“Binance does not want to touch any funds that come from unknown sources,” Yap said.

Binance did not immediately respond. DL News'Requesting comments.

Justin Ehrenhofer, founder of Moonstone Research, a cryptocurrency research firm specializing in hard-to-trace transactions, said: DL News The Monero community did not consider an exchange-only approach.

lots of discussion

Either way, the idea is gaining traction.

“There has been a huge amount of discussion about this within the Zcash community,” said Zuko Wilcox O’Hearn, CEO of Electric Coin Company, which is developing Zcash. DL News.

Yap said DL News The replacement address solution is expected to be released within two weeks.

What Binance will do at that point is anyone's guess.

Liam Kelly is a DeFi correspondent based in Berlin. To contact him, liam@dlnews.com or on Telegram @Liam Garrus.