It was recently revealed that Coinbase’s U.K. branch would be dropping support for Zcash (ZEC) by August 26th. The privacy coin likely failed to meet basic regulatory requirements on account of its anonymity.
By August 26th, all Coinbase UK users who have ZEC in their wallets must transfer them out or convert them to a supported cryptocurrency. What started as rumors has now been confirmed by the developer of Zcash itself.
Coinbase UK Delists Zcash
The Electric Coin Company, which supports Zcash’s development, claims that the cryptocurrency is fully compliant in every respect to UK law. Yet, the developer gives no reason for Coinbase UK’s dropping support for the privacy coin.
Those affected by @coinbase UK issues: this is limited to Coinbase UK only. UK residents can still buy/sell Zcash through @cex_io. No other exchanges in the UK affected. To pre-empt speculation, we confirm that Zcash is 100% compatible with UK regulations & KYC/AML requirements.
— Electric Coin Company (@ElectricCoinCo) August 9, 2019
Some Zcash users have speculated that the move could be a result of tightening restrictions placed by the HM Revenue and Customs agency. On August 6th, the agency sent letters to Coinbase, eToro, and CEX.IO and demanded these firms better supply customer data. This alone could be the reason Coinbase is removing support for privacy addresses. Bear in mind, when Coinbase first added the cryptocurrency in December 2018, it initially was not even offered in U.K. jurisdictions.
Coinbase may just be trying to play it safe, but other exchanges could follow. Despite having far less trading volume than Coinbase, CEX.IO could also be targeted or be pressured to do the same.
Privacy Coins Pose a Regulatory Problem
If you recall the recent announcement made by Coinbase on cryptocurrencies they were ‘exploring,’ Monero was notably absent. In fact, you’ll be hard-pressed to find any privacy coins being ‘explored’ by Coinbase other than Zcash, which is now on thin ice.
A similar situation is unfolding at Binance’s new American exchange, Binance.US. Monero (XMR) and Zcash (ZEC) are surprisingly absent from the list of cryptocurrencies the exchange is exploring, indicating that the regulatory problems are real. These established cryptocurrencies have no reason not to be listed unless there was some specific regulatory issue. Interestingly, however, Zcash is currently trading on the New York-based exchange Gemini, but it’s uncertain if this will last.
As regulators step up in clearly delineating regulatory policy and imposing heavy penalties for those that don’t comply, privacy coins will likely be hit hardest. Coinbase clearly cannot take that kind of risk, which is why it is delisting Zcash.
Do you believe regulators will target privacy coins? Let us know your thoughts in the comments below.
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