How Do Privacy Coins Complicate KYC Procedures?
Privacy coins, such as Monero or Zcash, use cryptographic techniques like zero-knowledge proofs to obscure transaction details, including the sender, receiver, and amount. This inherent anonymity makes it extremely difficult for exchanges and financial institutions to perform the necessary transaction monitoring required for AML compliance.
Consequently, many regulated exchanges de-list or avoid trading privacy coins.
Glossar
Trading Privacy
Anonymity ⎊ The pursuit of trading privacy within cryptocurrency derivatives necessitates a layered approach, extending beyond simple pseudonymity.
Privacy Coins
Asset ⎊ Privacy Coins are cryptocurrencies fundamentally designed with built-in features intended to obscure transaction details, such as amounts, senders, and receivers, from the public ledger, thereby prioritizing transactional confidentiality over radical transparency.
Cryptographic Techniques
Implementation ⎊ Cryptographic Techniques are the specific mathematical algorithms and protocols, such as elliptic curve digital signature algorithms or zero-knowledge succinct non-interactive arguments of knowledge, employed to ensure data integrity, authenticity, and privacy within decentralized systems.
Financial Institutions
Intermediation ⎊ ⎊ Financial institutions operating within cryptocurrency, options, and derivatives markets function as critical intermediaries, bridging the gap between capital seekers and providers, and facilitating risk transfer through standardized contracts.
Regulated Exchanges
Exchange ⎊ Regulated exchanges, within the context of cryptocurrency, options trading, and financial derivatives, represent platforms subject to oversight by governmental or self-regulatory bodies, ensuring adherence to established rules and legal frameworks.
Transaction Monitoring
Anomaly ⎊ Within cryptocurrency, options trading, and financial derivatives, anomaly detection forms a core component of transaction monitoring, identifying deviations from established behavioral patterns.