One wonders if it will be a straight line from a move to delist to cease and desist.
It’s well-known that cryptocurrencies — which of course come in a myriad of flavors, to entice any number of investors (OK, yes, speculators too) to put up their hard-earned fiat — are moving from the Wild West to the ever-watchful eyes of regulators.
Seemingly every facet of crypto trading is under scrutiny, from security to taxation to how various digital coins change hands, when and where.
In South Korea, news came Monday that at least some cryptos, only a few to be sure, and of a specialized stripe, will be removed from an exchange there, and we wonder if ripple effects may be in the offing.
The South Korean operation of a cryptocurrency exchange known as OKEx is “removing support” for five altcoins: Those coins, per a blog post from OKEx Korea, stated that trading would be halted in of Monero (XMR), Dash (DASH), Zcash (ZEC), Horizen (ZEN) and Super Bitcoin (SBTC) in less than a month on Oct. 10.
Cointelegraph reports that the exchange has said the coins are being delisted because they are “privacy” coins, and clash with regulations put forth by the Financial Action Task Force (FATF). Those guidelines mandate that if a transaction is worth more than $1,000, parties tied to crypto transactions must be identified.
The move follows reports in August that stated that the UK operations of another exchange — Coinbase — would stop supporting zcash. At the time, Coindesk.com reported that there had been no reasons given for the change, and also noted that other exchanges in the UK would, indeed, still support trading in that altcoin.
One reason crypto exchanges need to identify who’s who among the trading comes as various governments want (and yes, need) to identify who might owe taxes.
Yes, there is, of course, the desire to collect where collection is due.
The patchwork nature of the delistings speaks to the fact that cryptos find favor and disfavor in a fragmented way, across countries, and at times, within countries. As noted, OKEX has said it will support the trading of those altcoins on other platforms beyond South Korea.
It stands to reason that at least some holders might shift their activity to those other platforms, or if they can, to other countries. This serves to muddy further the waters of who is trading what and skirts the desire (from stakeholders such as regulators) for transparency.
From Ripple Effects to Tsunami?
In terms of ripple effects, a few waves can, eventually, point the way to a tsunami.
The idea of an altcoin is that it serves as an alternative to bitcoin. On its surface, the concept is a good one, and devoutly to be wished when new ecosystems in commerce take shape. You likely know that bitcoin is the marquee name in the space, and any number of competitors have launched from various quarters, with operational or use case wrinkles. In some cases, altcoins sport shorter “block” generation time, which would imply less effort, cost and time to production, thus boosting liquidity.
In the variant known as privacy coins, the sector is relatively small, with $2.2 billion market cap, overall, as determined by cryptoslate.com, and where Monero dominates with $1.3 billion of that market cap. As Monero goes, so might this corner of crypto-land.
These coins operate on their blockchains. In some cases use cryptography, and the distributed ledger technologies (DLTs), to make transactions untraceable. In other instances they conceal IP addresses. The name of the game is decentralization, which has been a critical selling point for crypto proponents in general, as decentralization is touted as a way to circumvent the central banking system.
However, as Dean Martin once said of Sinatra: “It’s Frank’s world. We just live in it.” The fact remains that the rules governing the exchanges – think of them as the shopping centers for cryptos – still are dictated by conventional sources, by which we mean: Regulators.
Those regulators, and we’ll keep the FATF on that list, have money laundering and terrorism in focus.
In June, the FATF issued a statement that read, in part: “The threat of criminal and terrorist misuse of virtual assets is serious and urgent, and the FATF expects all countries to take prompt action to implement the FATF Recommendations in the context of virtual asset activities and service providers. The FATF will monitor implementation of the new requirements by countries and service providers and conduct a 12-month review in June 2020.”
The FATF, too, is far-reaching, with dozens of “member jurisdictions” running the gamut from Argentina to Israel to Russia to the United States. The snippet of statement above hints at least at some desire for uniformity of policy moving forward, and less than a year from now we may see a somewhat different crypto landscape than the one that we see now.
Where one nation fires a salvo against (some) cryptos, it’s not too far-fetched to think that associate nations will take aim.