The right to privacy is a fundamental prerequisite for peace of mind and security. The idea that only criminals have something to hide is strange. Contrarily, privacy is sought by almost everyone. Yet, it still gets stigmatized as suspicious — reserved solely for criminals or deviants.
Similarly sharing this unjust scrutiny are cryptocurrencies, which are — rather ironically — branded as a tool for felons, based largely on their anonymous hallmarks. However, no cryptocurrency is as disparaged for this discreet quality more than the privacy coin.
But just what are privacy coins used for? How has crypto criminality changed in 2019? And what’s in store for the future?
Is BTC making the cut?
Contrary to popular belief, Bitcoin (BTC) isn’t as anonymous as most people assume. The blockchain is, for all intents and purposes, an immutable, publicly held ledger of every single BTC transaction… ever. For this reason, Bitcoin isn’t particularly advisable for illegal activity — take note, criminals.
While no personal information can be gleaned from a typical BTC transaction, a quasi-pseudonymous sequence of characters — aka public addresses — are often more than enough to stop criminal activity in its tracks. On more than one occasion, BTC funds originating from a hack or heist have been traced and blacklisted. Moreover, all that stands between an “anonymous” BTC address and a user’s true identity is a centralized exchange and a Know Your Customer check.
Of course, there are alternatives. Unlike other digital currencies, privacy coins conceal the information present within a typical crypto transaction. There is no record of the recipient’s or sender’s addresses, and the transaction amount remains obscured, creating a decidedly anonymous payment system.
Nevertheless, the fact that these coins allow for the nondisclosure of identity doesn’t mean that they were intended for criminal use. The same goes for the people who use them. After all, financial privacy is generally regarded by most as integral. Just as people wouldn’t want just anyone to peruse their bank statement, not everyone wants their crypto transactions on record.
Privacy coins and criminality
There is a scarce amount of privacy in the digital age. Every single crumb of data is vyed over by corporations looking to gather as much information as possible. This is arguably one of the principal reasons for Big Tech’s recent foray into the financial industry.
Take Google’s latest venture, for example: checking accounts. On the surface, the enterprise looks to provide customers with a broader analysis of their financial lives. However, critics suggest that it’s actually Google looking for these insights.
Given this, it’s perhaps understandable why the need for an anonymous cryptocurrency arose in the first place. Yet, as with any value-based commodity, privacy coins do allow a sufficient scope for misdeeds. In fact, Monero rose to the mainstream consciousness earlier this year for this very reason.
Back in January, scores of media outlets reported on the abduction of Anne-Elisabeth Falkevik Hagen, wife of Norwegian millionaire Tom Hagen. A ransom note found in the couple’s home demanded $10 million worth of Monero. Still, even with this tragedy generating global headlines, Monero’s use on illegal darknet marketplaces has stayed relatively subdued.
Within its Q2 2019 Cryptocurrency Anti-Money Laundering Report, blockchain forensics firm Ciphertrace revealed that a mere 4% of dark vendor payments involved Monero. Incredibly, Bitcoin still reigns king of the darknet, citing usage in a massive 76% of cases. Speaking to Cointelegraph, John Jefferies, CipherTrace CFA, suggested this originates via “liquidity issues,” adding that:
“While privacy coins offer bad actors a level of anonymity, the liquidity issues and barriers to entry for buying and selling privacy coins make them impractical for most dark market purchases.”
However, Tom Robinson, co-founder and chief scientist at crypto security firm Elliptic, told Cointelegraph that regardless of Bitcoin’s dominance within dark markets, privacy coins are still gaining steady traction and usability:
“Another trend we are seeing is the increased acceptance of privacy coins such as monero on dark markets where narcotics are available to purchase. Most new markets now accept monero payments, typically alongside Bitcoin. This represents a threat to law enforcement’s ability to trace this kind of activity and bring those involved to justice.”
Incidentally, CipherTrace’s report for the third quarter 2019, also unveiled more about the state of crypto criminality in general. According to the researchers, a monumental $4.4 billion in crypto crimes and frauds were witnessed throughout this year, marking an extensive 2,500% increase since 2017.
Regulatory snooping increased in 2019
Regardless of their lack of use on the darknet, a regulative crackdown on privacy coins threatens to unstick anonymous crypto. In June 2019,…