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ShapeShift, the Colorado-based cryptocurrency exchange that allows users to self-guard their assets, has removed another privacy coin.
Zcash has been removed from the trading platform in addition to Monero and Dash. Decrypt reported last Friday that XMR and DASH had been silently removed; the delisting of ZEC was not noticed.
“We have withdrawn the privacy coins due to their regulatory concerns,” Veronica McGregor, ShapeShift’s chief legal officer, told CoinDesk in an interview. “At least for the moment, we’re not working with those coins.”
XMR, DASH and ZEC “were removed simultaneously for the same reason: to further derail the company from a regulatory perspective,” McGregor wrote in a follow-up email.
The removal of ZEC is somewhat remarkable because the company invested in Electric Coin Company, one of the creators of zcash, in 2016 and went public with ZEC in October.
ShapeShift has become increasingly aware of regulators, despite its founder once having a reputation as a rebel and libertarian.
Previously, the platform allowed cryptocurrency trading without any kind of account or login, but in 2018 ShapeShift began requiring customers to reveal their identity to the exchange. In 2019 it was investigated after a Wall Street Journal report said ShapeShift had been widely used for money laundering.
Coins for privacy and bank cops
A September report by law firm Perkins Coie on privacy-enabling cryptocurrencies found that XMR is a private cryptocurrency by default, as all transactions are made so that only the sender and recipient should know who attended.
Both ZEC and DASH make privacy optional.
Read more: Monero and Zcash conferences show their differences (and links)
Peter Van Valkenburgh is director of research at Coin Center and a member of the board of directors of the Zcash Foundation. He explained to CoinDesk in a phone call that the US Financial Crimes Enforcement Network’s guide, or FinCEN, “basically says, you have to make sure you take reasonable steps from a cost-benefit analysis to prevent crime proceeds from flowing through the your institution. “
Since many cryptocurrencies, such as bitcoin, make all transactions and balances public, he explained, working with blockchain surveillance firms like Chainalysis or Elliptic may be enough to be seen as taking reasonable steps.
That said, privacy-preserving cryptocurrencies will be treated, Van Valkenburgh said, as someone who shows up at a bank with a large sack of cash. They may be subject to more in-depth review or more in-depth background checks (as possible examples).
“As far as I know, FinCEN has made it clear enough to regulated cryptocurrency companies that there is a way to comply, just like banks deal with cash,” Van Valkenburgh said.
Read more: SEC, CFTC, FinCEN warn the crypto industry to follow US banking laws
Although it also offered the caveat that a particular agency or the zeal of a particular regulator may be enough to discourage a company from engaging in a business sector, even if no action is taken against them.
“The Bank Secrecy Act is extremely broad. It gives prosecutors and regulators a lot of powers, “he said.” This vagueness about our financial surveillance laws is problematic for me. ”
CoinDesk has reached out to other US cryptocurrency exchanges listing coins for privacy but have not received any responses at press time.
Ian Allison contributed to the report.
