The fight against privacy coins like Monero (XMR) continues. German customers will no longer be allowed to trade Monero on the Kraken exchange, and the P2P marketplace Local Monero will also close soon. But there are alternatives, one of which is particularly promising. In Great Britain, the government is now passing a law on privacy coins that is sensationally inexperienced in monetary terms.

There is some news about Monero (XMR), the most exciting privacy coin. We expected them to be rather weak. The war against monetary anonymity is already underway.

The Kraken exchange, one of the most important trading venues for Monero, announces a trading halt on July 10th for German customers. It removes numerous coins from trading, most likely because the trading volume is too low or there is a risk of possible unauthorized securities trading. But since it also delists the privacy coins Mina and Zcash in addition to Monero, there may also be problems with the anonymity of some currencies.

This delisting applies to all assets that run in cooperation with Kraken and DLT Finance, a German GmbH through which Kraken has secured approval from BaFin. Therefore, the assets mentioned will no longer be traded in Germany from July 10th.

This move follows a delisting of Monero in Ireland and Belgium. In coordination with the cooperation partner, similar reports can be expected for the rest of Europe. Kraken is not alone in this. Predictably, most exchanges have never added Monero to trading or are already removing it. Sooner or later, only a few exchanges in a few regulatory havens will likely continue to list Monero. Trading with an actually anonymous coin is unlikely to be compatible with the FATF’s regulatory ideas, especially the “Travel Rule”.

P2P trading is also under pressure

Anyone who thinks that it wouldn’t be a problem since the real trading of privacy coins takes place over the counter anyway – for example with Local Monero or via Atomic Swaps – should think again: Samourai, which opened Atomic Swaps between Bitcoin and Monero a good month ago, was shut down; the developers arrested. And Local Monero, which is now more necessary than ever, announced at the beginning of May that it would also be closing after seven years:

“We have made the difficult decision to close our platform. It is based on a combination of internal and external factors,” explain the developers. They continue to believe in the future of Monero and see exciting developments, but the website will be shut down in about six months. The team does not give any specific reasons, but it is obvious that the regulatory pressure became too high.

Strictly speaking, and in light of the lawsuits against Samurai or Tornado Cash, the developers of Local Monero, although they never exercise escrow over coins, have AML obligations to regulatory authorities such as the US FinCEN. The new approach of the US justice system is already having an impact.

Of course, there will always be individual exchanges and peer-to-peer platforms that allow trading in Monero. A complete ban or a complete “death by regulation” is simply impossible for cryptocurrencies. You can already trade Monero on several decentralized platforms, such as Bitvalve, Haveno or Serai; more have been announced. You know how to make atomic swaps to Monero; This genie cannot be put back in its bottle.

However, a massive problem will be pricing. Without large centralized or decentralized exchanges, it is hardly possible to find stable prices for a coin. Completing a P2P trade depends on many factors – such as the counterparty’s means of payment – and liquidity providers are subject to such great risks – they have one foot in prison for aiding and abetting money laundering – that pricing will almost inevitably be unreliable.

Prices will not only be volatile over time, as with Bitcoin and, even more, smaller cryptocurrencies, but also across space: they will vary significantly from marketplace to marketplace, and probably from offer to offer. If you want to buy or sell larger quantities, there will probably be liquidity bottlenecks and high slippage costs if a trade eats too deeply into the order book.

XMRT: Monero as Token on Ethereum

A technically exciting solution comes from Everywhere Finance, a team of developers that wants to build an “omnichain ecosystem.” It recently announced XMRT, an ERC-20 token on any blockchain that corresponds to Monero. It is believed, the team writes, “that no centralized exchange will accept XMR in the future.” Therefore, they offer a solution.

The XMRT tokens are bridged from the Monero blockchain to any ERC-enabled blockchain – such as Ethereum. There they are mined when deposited and burned again when paid out on the Monero blockchain. Similar to atomic swaps, the process takes place without anyone being able to cheat. The genie is already out of the bottle. The development is no longer to make Monero anonymous – this has already largely been done – but to ensure decentralized, exchange-independent trading. One can expect Monero developers to focus more on this in the future.

When Monero runs as XMRT on a blockchain like Ethereum, it gains access to the liquidity of the DeFi ecosystem, with decentralized exchanges like Uniswap, futures, options, lending and much more. Buying XMRT – and therefore redeemable XMR – will become possible with any Web3 wallet and, most importantly, frictionless decentralized trading across the many DeFi instruments will enable clear pricing.

The announced XMRT tokens could be exactly the liquidity solution a decentralized cryptocurrency market needs, and they could take the cat-and-mouse game between government and technology to a new level. Which, by the way, is not necessarily harmless, as it can encourage the judiciary to judge developers who create such solutions more harshly.

Amusing side note from the island

As a bonus, we have some amusing news from Great Britain, where lawmakers are characterized by remarkable monetary helplessness. They have passed a new law that is intended to make it easier to confiscate cryptocurrencies, including by no longer requiring an arrest warrant. A clause in the law also states that law enforcement officers should destroy coins “if returning them to circulation is considered detrimental to the public good.” They explicitly cite privacy coins such as Monero as an example, as they “provide an extremely high degree of anonymity and are therefore often used for money laundering”.

As understandable as the idea behind it is, the clause is economically nonsensical. Since a coin like Monero has numerous decimal places, burning confiscated coins does not affect their circulation in trade in the slightest. The loss of coins is, Satoshi said a long time ago, “like a donation to everyone.” Because they “just make everyone else’s coins a little richer.” Everyone else is likely to take precedence in this case and in the world of British lawmakers Above all, the criminals should no longer use Monero.


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