Are anonymous blockchains starting to self-censor? Horizen has just announced the end of anonymous transactions on its mainnet. In question, certain international laws which, like the European Union and its MiCA and TFR texts, require cryptocurrency exchanges to collect personal information about their users. We take stock of the situation.
An anonymous blockchain soon to be transparent?
Since the beginning of June, the cryptocurrency industry is tormented by discussions about the regulation of the sector. While in the United States, the main debate concerns the qualification of certain cryptocurrencies as securities (“securities”), other reflections take place on the confidentiality of transactions.
In this context, the community around the Horizen blockchain recently voted for a modification of its protocol involving the end of anonymous transactions on its network.
$ZEN will no longer be considered a privacy coin after the deprecation of the mainchain shielded pools. We are actively working with our exchange partners to keep $ZEN accessible for our global users.
— Horizen (@horizenglobal) June 27, 2023
” The ZEN token will no longer be considered an anonymous cryptocurrency after the deprecation of the mainchain protected pools. We are actively working with exchanges to keep the ZEN token accessible to our global users. »
In addition, from September 2023, transactions will be published on the blockchain mainnet transparently. With this update, support for so-called “protected” transactions will be impossible at the blockchain consensus level.
The team behind the project tries to reassure its users by saying that this modification does not imply the end of confidentiality on its ecosystem: the sidechains developed on Horizen will always be able to guarantee the confidentiality of personal data.
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Anonymity on the Web3 and its regulatory implications
To understand why this update will be implemented on Horizen, you have to look at the regulation side. Last May, Binance Announced Suspending Support for Enhanced Anonymity (CAE) Cryptocurrencies in Europe. On this list, we find the XMR of Monero, the ZEC of the Zcash network and the ZEN of the Horizen ecosystem.
Although the cryptocurrency exchange wants to reevaluate its position to exclude certain cryptocurrencies from this list, this measure does not seem to apply to the ZEN cryptocurrency.
Binance being the leader in the field of exchanges, with the largest trading volumes in the entire industry, the exclusion of these anonymous cryptocurrencies could greatly reduce the use of their blockchainsin particular because of the loss of visibility with investors.
However, note that Changpeng Zhao’s company only does adapt to the demands of European regulators. As part of the fight against money laundering and terrorist financing, the European Union has approved the MiCA (Markets in Crypto-Assets) and TFR (Transfer of Funds Regulation) regulations.
These two texts stipulate that companies providing services involving digital assets, such as cryptocurrency exchanges, must be able to provide the personal data of their users.
So companies like Binance can’t afford to host cryptocurrencies. going against the legislation soon to be in force.
Horizen has chosen to restrict anonymity around its transactions to maintain its presence on cryptocurrency exchanges and guarantee the survival of its ecosystem. On their side, the MiCA and TFR texts will come into force from 2024.
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Source: Horizen
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Always enthusiastic about new technologies, I gradually moved closer to Web3-related activities during the year 2021. Over time, I wanted to add my stone to the building. It was then that I became an editor, with the aim of explaining cryptocurrency-related topics to as many people as possible.
Timothy Bourbotte
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