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Cryptocurrency exchange ShapeShift recently removed three privacy coins: Dash, Zcash (ZEC) and Monero (XMR). This was an unexpected move to say the least, given the exchange’s historic commitment to privacy.
As a non-custodial platform, Shapeshift did not impose user identification requirements on traders in its early days, although this began to change with the gradual introduction of a mandatory, Know Your Customer-compliant enrollment model, starting in 2018.
Why then, did it move to remove Dash, Zcash, and Monero, even though other exchanges like Coinbase, Kraken, and Binance.US still list these coins? In a shared statement with Cointelegraph, Dash Core Group chief financial officer Glenn Austin said he found the delisting “particularly frustrating because [it] it could have been completely avoided with just a 10-15 minute call. ”
Austin believes the delisting comes down to “an educational issue”. Although the reasons for the delisting have not been officially clarified, Austin speculated that the move could be influenced by the currency being mentioned twice in the recently published “Cryptocurrency Enforcement Framework” by the Justice Department.
In both cases, Dash has been cited alongside Monero and Zcash as an example of anonymity-enhanced cryptocurrency. The DoJ identified the use of such currencies as “a high-risk activity indicative of possible criminal conduct”.
Dash’s argument is that its currency isn’t truly a privacy coin. The group cites the assessment by leading law firm Perkins Coie in September 2019 that “the widespread perception that Dash is a ‘privacy coin’ is likely a legacy of its former nickname ‘Darkcoin’ and does not accurately reflect its actual functionality. “. Perkins Coie said Dash has the same functionality in this regard as Bitcoin (BTC). Austin explained:
“There are various privacy enhancement techniques that can be implemented on any public blockchain, including features such as off-chain transactions, address or amount shielding, Mimblewimble, tumbling / mixer and Coinjoin. CoinJoin is the only privacy feature currently existing in wallets. Dash. Bitcoin also has many wallets that support CoinJoin. “
Chainalysis, a leading blockchain analytics firm, agrees that from a technical standpoint, privacy coin is “a misnomer for Dash”. The firm, which offers investigation and compliance support to the Dash Core Group, pointed out that “the independent wallet software provides more advanced forms of CoinJoin that are used with major cryptocurrencies not labeled as privacy coins, such as Bitcoin. Bitcoin Cash and Litecoin. “
Austin goes even further with this topic. Beyond his emphasis on the misconceptions surrounding Dash, he argues that the support of off-chain transactions with Bitcoin via the Lightning Network and the prevalence of Bitcoin in darknet markets make it a higher risk from a regulatory perspective. Additionally, software like Chaumian CoinJoin, which can be used with Bitcoin wallets but not Dash ones, is an even more sophisticated means of hiding data from other network participants, he says.
“We presented all of this information to FinCEN but it seems that the message never got through to the DoJ,” Austin said. The company has also contacted ShapeShift and says it will continue to pursue the matter until it is resolved.
