The nature of privacy coins such as Monero (XMR) makes them perfect for cryptocurrency users who value and wish to preserve their anonymity. However, the authorities believe that this puts everyone else at risk, which is why privacy coins are often targeted and criticized.
Earlier this year, in May, the US Financial Crimes and Enforcement Network (FinCEN) attempted to regulate the matter by publishing guidelines for companies that handle cryptocurrency. The guidelines obligated companies with keeping records of anyone who decides to make XMR transactions.
However, Monero’s Compliance Workgroup now published a statement, proclaiming that the so-called ‘The Funds Travel Rule’ does not apply to XMR. If true, this would preserve Monero’s privacy-friendly nature.
Monero Compliance Workgroup’s response
As mentioned, Monero made its stance towards the new regulations known in a recent announcement. The announcement clearly states that the rules do not apply to cryptocurrencies at a basic level, in this case, on XMR itself.
The loophole that the group has pointed out is that the rule only applies to regulated entities, but not on the underlying assets in which the entities trade.
Simply put, the guidelines do not obligate businesses to attach identity information to the assets themselves. With that in mind, the Workgroup believes that on-chain information sharing remains unnecessary.
The Workgroup did say that businesses can store relevant data on Monero’s own blockchain via the tx_extra field. But, they also pointed out that this would very likely overburden the blockchain, suggesting that companies should do it via off-chain tools.
It would appear that regulators once again failed to force privacy coins to comply with their requests. However, while legal loopholes allow them to exist without submitting, that also means that privacy coins will continue to be undesirable on regulated exchanges.
As long as they are not regulated, they represent a risk, and many major exchanges have had them removed from their lists.