Cryptocurrencies lose anonymity, more and more exchanges require KYC

KYC on cryptocurrency exchanges is becoming a trend. But there are still ways to use cryptocurrencies while maintaining privacy and relative anonymity

Cryptocurrency exchange Bybit announced that by May 8, all of its customers will have to pass KYC in order to use any of the platform’s products and services. For the minimum level of verification, users will need to provide identification documents. Also pass identification by photo. The exchange is one of the top 5 largest crypto trading platforms. And before that, it did not impose restrictions, allowing to use the services relatively anonymous.

Governments and regulators around the world are systematically tightening anti-money laundering (AML) compliance requirements for cryptocurrency. Wallet operators and cryptocurrency exchanges are forced to take steps to comply with ever-changing regulations.

Most often, when talking about regulation, the U.S. is mentioned. But the trend toward stricter requirements is not only there, our experts say. The Global Financial Action Task Force (FATF) has been talking about the need to curb the use of cryptocurrencies for money laundering for years. In this case, any crypto-exchange, even if it is not registered in the U.S.. And does not formally work with U.S. users, is at risk if it does not comply with U.S. regulators.

Anonymity and privacy are a thing of the past ?

Non-big crypto exchanges have the ability to adhere to a more flexible KYC/AML policy. But at some point this issue is likely to affect them as well. Therefore, truly anonymous channels for converting cryptocurrencies into fiat money are likely to be gone soon.

Our experts point out that we can already say that there are no more. Because both the bank and CEX see the transaction activity on the bank card. And if it belongs to the person making the transaction, all his activity is already available for viewing.

Small transactions with cryptocurrencies traditionally took place in online exchanges and not on cryptocurrency exchanges. Large p2p services are also seeing a strong tightening of anti-money laundering requirements.

There are OTC (over the counter) exchanges – analog of p2p for large investors. Here coins are sold by big lots. But our experts believe that in the next year or two platforms with low AML and KYC requirements will be forced to at least tighten the requirements. Cryptocurrency has become too visible to leave such freedom for it. Considering that all areas of human life are being totally tightened.

For a really large number of users, privacy as the original ideology and value of cryptocurrency is important. Both in the meaning of “anonymity” and in the context of control over their funds. And the ability to dispose of them as they see fit. Such possibilities still remain, thanks to small CEXs, decentralized exchanges (DEX), private exchanges and OTC services, including those with cash.

This is an advantage of such services, but there are also risks. Because the responsibility and check the reliability of services lies on the user himself. Under these conditions, many users will choose not to be anonymous for the sake of convenience and security. But there will always be choices for those for whom privacy is more important.


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Dubai banned the issue of anonymous cryptocurrencies and transactions with them

Dubai bans coins that interfere with transaction tracking, such as Monero and Zcash. Crypto-Upbotes expert review

Dubai (one of the UAE emirates) has banned the issuance and transactions of anonymous cryptocurrencies. The restriction was imposed by a new set of rules on virtual assets and related activities published by the emirate’s regulator, The Dubai Virtual Assets Regulatory Authority (VARA).

Authorities in various countries have a negative attitude towards anonymous cryptocurrencies and take various measures to restrict their use. Because with the emergence of such coins, the number of fraudulent attacks and financial fraud with cryptocurrencies has increased significantly. Attackers often use these tokens to hide the movement of stolen funds.

A set of rules adopted by the Dubai regulator bans cryptocurrencies that “enhance anonymity,” such as Monero, Dash and Zcash. According to the document, this is a type of virtual asset that prevents transactions from being tracked or records of ownership through public blockchains, and for which the VASP (cryptoservice provider) has no technology or mechanisms to track them or determine ownership of them.

The issuance of anonymity-enhancing cryptocurrencies and all activities related to them are prohibited in the emirate, the new law says.

The new rules also establish mandatory licensing for cryptocurrency companies operating in this region. They detail the procedure for issuing, storing and exchanging cryptocurrencies, cybersecurity standards, and requirements for various activities related to digital assets.

Our experts note that after the introduction of compulsory licensing of cryptocurrency-related activities in Dubai. The regulator has already received hundreds of new license applications. To cope with the flood of applications, VARA plans to quadruple its staff over the next few months.

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Ethereum validators started rejecting most Tornado Cash transactions

Tornado Cash is under attack again. Most MEV bots do not handle addresses of this service.

Ethereum validators have begun rejecting most transactions related to the Tornado Cash service. As well as addresses on the U.S. Office of Foreign Assets Control (OFAC) sanctions list. So according to the MEV Watch tool from blockchain company Labrys. About 52% of blocks on the Ethereum network are validated through MEV bots that comply with U.S. sanctions. Another 6% of validators use bots that do not enforce sanctions. And about 42% of nodes on the network do not use such programs.

MEV bots are centralized software designed to extract maximum extractable value (MEV). Such software has become popular among validators because it efficiently selects those transactions that can generate the most profit.

MEV Watch shows which bots have been adhering to OFAC sanctions since Ethereum switched to Proof-of-Stake. These bots “discard” blocks with transactions associated with sub-sanctioned addresses. And this leads to an inability to put these transactions into the blockchain, no matter how high the fee would be.

According to platform data, there are currently 7 popular MEV bots. They are: Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, BlockNative, Manifold and Eden. Of those, only 3 do not censor transactions as required by OFAC. They are: BloXroute Max Profit, BloxRoute Ethical and Manifold.

Remember that on August 8, the U.S. Treasury Department published an update to the sanctions list (SDN). They included Tornado Cash cryptocurrency protocol and associated digital wallet addresses. The reason for blocking was that this service is used by hackers to launder illicit proceeds.

The attack on confidential Tornado Cash service continues. Our experts believe that in the near future the pressure on this service will only grow. We hope that they will be able to withstand all these blows.



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World War against anonymous cryptocurrencies. What awaits private tokens review by Crypto-Upvotes experts

Our experts told how anonymous cryptocurrencies are affected by stricter regulation. And their delisting from CEX exchanges, as well as prospects for such projects.

Main goal of anonymous cryptocurrencies is to ensure confidentiality of financial transactions. However, with such coins, scams and financial manipulation of cryptocurrencies have increased significantly. Cybercriminals often use these tokens to conceal movements of stolen funds.

In this regard, governments of different countries have a negative attitude to anonymous cryptocurrencies. And they take various measures to limit their use. Some cryptoplatforms are also refusing to work with confidential tokens. Thus, one of the recent negative events was the delisting of Monero (XMR) and another six tokens from this category on major cryptocurrency exchange Huobi.

Trend on delisting of anonymous cryptocurrencies increases

Currently, we are seeing a steady trend towards increased regulation of cryptocurrency. And also drive for large CEX exchanges to get as many licenses as possible in different jurisdictions.

And understanding of anonymous coins by financial regulatory authorities of leading economies is very negative. Anonymous coins are seen as a threat, a tool for scammers. And as a consequence, we see a “world war” against anonymous cryptocurrencies, our experts note.

Demand for anonymous cryptocurrencies is growing

After starting sanctions war between Russia and the West, interest in confidential cryptocurrency increased rapidly. This was due to their ability to circumvent restrictive regulations.

Our expert pointed out that in Q2, anonymous coins showed outperformance compared to the market as a whole.
Whether delisting from exchanges will affect prices of these coins, now it is difficult to say. Such actions by regulators could have collapsed prices in 2017. But now the market has become less susceptible to such news for many reasons.

Given the fact that these cryptocurrencies remain in high demand. Including due to sanctions that have reached cryptocurrency market as well. And wait for a fall in prices for XMR and other anonymous coins from these events should not be our experts’ opinion.

Anonymous cryptocurrencies may lose their capitalization, but not their real value.


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