Just over a week ago, CoinDesk reported that the EU would enact rules that would effectively ban cryptocurrencies that utilize privacy-preserving technologies. The article reported that the draft came from officials from the Czech Republic and would not directly make the use of the cryptocurrency illegal, but would prohibit credit, financial institutions, and crypto-asset providers from being able to use them. This is in large part an amendment to AML (Anti-Money Laundering) rules that were drafted last year and would further tighten the screws on privacy-based projects.

The details included in the leaked Czech proposal were the following:

Crypto asset providers will be obliged to verify customers’ identity even for occasional transactions less than €1,000

Larger payments will require a probe into the nature and purpose of the business

Crypto service providers doing business outside of the EU will need additional requirements on the counterparty to ensure that they are licensed and what AML controls they have in place

Myopia in Decision Making

A common pitfall from regulators in trying to put regulations on crypto is that they’re developed with good intentions, but usually fail to actually solve the root of the problem.

The road to hell is paved with good intentions

A principal driver for all these attacks on privacy coins and cryptocurrency in general, is to deter bad behavior on the chain. The irony of this predicament is that those who are well-versed in blockchain technology would know that an immutable ledger is not an ideal way to carry out nefarious activity. The best privacy coin to transact with while doing illegal activities is fiat. The obstacles of managing and moving funds tied to illegal activities are so much harder on-chain that fiat makes more sense to do it. Although privacy coins by default have ways to obfuscate transactional data, for criminals it’s all about moving cash gained through illegal measures and using that case. This would mean that regardless if they used privacy coins, they would need on/off ramps to effectively manage the movement and usage of these funds. It’s easy to make an uneducated presumption that privacy coins are ideal for criminals, but in actuality, it complicates the process more than it probably is worth.

Regulations also have had little effect on deterring criminal activities. Typically, regulators try to have a heavy hand on topics that are controversial and/or have a buzz around them. The FTX scandal is a prime example of how regulators are looking into how to regulate crypto, but the failure and crimes committed were not caused by blockchain/cryptocurrency. This attack on privacy is an extension of the same argument, where politicians and regulators (many of whom don’t have the least idea of how it all works) want to stamp their authority and “control” how things will work in their jurisdiction.

Preserving Privacy

At Conceal Network, the right to privacy is an utmost, non-negotiable right. Unlike a driver’s license where you need to get permission to drive, privacy is a right and the ability to handle transactions not under the watching eye of “Big Brother” or anyone else is critical. The technology utilized by Conceal enables the obfuscation of transaction data, making it untraceable and unlinkable so that anyone can transact with another party and not need to worry about that information being publicly available. The community and Conceal team would unanimously agree that these attacks on privacy coins are unfounded and ill-developed. The intended effect of these proposals by the EU is more an attack on an individual’s privacy than on any illegal activities or movement of funds.

As a community, we must make our voices heard and reach out to our local, regional, and national politicians and voice our concerns. Also, take the time to spread and educate family and friends about how privacy coins work and how any laws against them are so far off from making any real dent in minimizing crime. The key is generating a voice, supporting privacy-preserving projects like Conceal, and educating/discussing with others about blockchain/cryptocurrency. Lastly take time to dispel much of the negative connotation that has been developed by media/governments in interactions with people who are non-native crypto people.