Privacy tokens like Monero ($XMR) and Dash ($DASH) are experiencing a pinch caused by an increasing regulatory crackdown targeting privacy coins. The move has placed insurmountable pressure on crypto exchanges dealing with the said digital assets.
According to reports, Monero, Dash, and Zcash were the most significant casualties. Some exchanges found it easier to perform privacy coin delistings rather than face the pressure accompanying global regulatory efforts targeting the privacy protocols. Per a recent Kaiko report, there have been at least 60 delistings targeting privacy tokens in 2024.
Last May, a popular $XMR trading platform called LocalMonero was forced to shut down due to what the directors called a “combination of internal and external factors.” The exchange announced it would permanently shut down its website on November 2, 2024. The move came amidst a growing regulatory crackdown targeting privacy tokens, which, in turn, hurts platforms that deal with said digital assets.
MiCA Crackdown Specifically Targets Privacy
Investors are hit by the cumulative effect as the world moves slowly on cryptocurrency regulation issues. Privacy tokens have been a case in point, where delistings and rolling bans have plagued the most significant projects in this sphere over the past few years. The European Union’s crypto regulation framework, the Markets in Crypto Assets Act (MiCA), which came into effect in 2023 but will be fully enforced at the end of this year, has been the capstone of the anti-privacy token movement. Authorities have run developers of privacy protocols like Blender, Samourai Wallet, and Tornado Cash out of town with arbitrary arrest and prison sentences.
MiCA outright prohibits digital asset providers like exchanges and other payment service providers from dealing with privacy, insisting that every user must be identified. Due to the regulatory crackdown targeting privacy tokens, many exchanges operating within the European Union have delisted mainly all cryptocurrencies with built-in privacy features. Binance, the leading crypto exchange in trade volume, dropped $XMR in early 2024, soon after pledging to restrict trading in the European Union in 2023, but walked the statement back a few days later.
Shrinking Dominance at Each Cycle
Other exchanges that have equally dropped privacy coins include OKX, which delisted at least 24 tokens in December 2023, while Kraken stopped supporting them in Belgium and Ireland last July after it suspended deposits and trading in May. These actions follow similar delistings by ShapeShift and Coinbase UK back in 2028. Trade volumes in these privacy tokens have continued to shrink as avenues for acquiring them dry up due to the ongoing delistings. This has led to the shrinking of privacy token dominance during each market cycle, especially following the announcement that LocalMonero, which enabled P2P trade in $XMR without the need for identification, announced it was closing down after seven years in the market.
LocalMonero was launched in 2017 and has acted as the $XMR equivalent of the platform LocalBitcoins ever since, maturing significantly over time. However, Monero seems to have faced the brunt of privacy coin delistings, which has affected its trading volume significantly. As the year has progressed, a starkly low number of privacy tokens compared to other coins have been traded due to the ongoing crisis.
Monero Dominates the Market
Monero, which dominates the privacy tokens market, was launched in 2014. Since then, $XMR has grown rapidly and reached a market cap of $2.8 billion at its best in May 2023. That placed the coin ahead of its competitors, Dash and Zcash, which have market caps of $550 million and $600 million, respectively.
Monero has enjoyed at least 32 million transactions, which have been declining throughout its existence. For example, there were over 8.6 million $XMR transactions in 2022 compared to 8.8 million in 2021. Comparatively, Bitcoin (BTC), the leading digital asset by market cap, registered 800 million transactions. The use of privacy tokens such as Monero has been relatively high due to, at least in part, a specialized characteristic they hold.
Conclusion
While users favour privacy tokens because they enhance privacy, they are a nightmare to authorities and regulatory bodies. This has led to lower liquidity compared to other cryptocurrencies, which could make it harder for users to carry out more significant transactions. This could negatively impact a market that has been popular with cryptocurrency users.
