Despite the fact that cryptocurrency is considered anonymous, in most cases this is far from the truth. All transactions are recorded on the blockchain and this information remains visible forever. That is, if a strong enough goal is set, it is quite possible for someone to reach the owner of a crypto wallet.
The first precedent took place in 2011. The FBI conducted a special operation against the well-known trading platform Silk Road. Its founder Ross Ulbricht was arrested and sentenced to life imprisonment. More than 144,000 BTC were seized during the operation. And yes, since that moment, the FBI has been among the largest holders of Bitcoin.
In 2021, a hacker attack took the computer systems of the Colonial Pipeline offline. The attackers demanded a ransom of 75 BTC. The FBI was able to track down and recover over 63 BTC. According to former prosecutor Katherine Hawn, this was possible precisely because the hackers used cryptocurrency. If they had used the services of the banking system, it would have taken much longer to recover.
That is, the privacy of cryptocurrencies is quite exaggerated. But this does not apply to all coins. Some cryptocurrencies are positioned as 100% private. In such networks, it is either impossible to trace transactions, or it is impossible to associate a wallet address with a specific person. The most famous and popular privacy coins are Monero and ZCash.
A complex history of privacy
To paraphrase the well-known Murphy’s law, we can say something like this: if a noble idea can be perverted, someone will definitely do it. Actually, this is exactly what happened with cryptocurrencies, they were often used and continue to be used for illegal purposes. Unsurprisingly, Bitcoin remains the preferred asset for money laundering.
At the same time, the regulators have nothing particularly against it. The reason is clear: the Bitcoin blockchain is transparent, it has accumulated a huge amount of data and anyone can be tracked in it.
Private coins have had a hard time lately. It is still possible to convert BTC to XMR on centralized cryptocurrency exchanges, but there are fewer and fewer such sites. Cryptocurrency exchanges are avoiding private coins and this process is only gaining momentum.
Even more concerns about the future of privacy cryptocurrencies are caused by new events, in particular, the ban on Tornado Cash and the arrest of its developer. Some countries impose bans on the use of private coins. They are illegal in Japan, South Korea and Australia prohibit swaps with such coins.
Swaps using private coins will be very difficult with further tightening of crypto regulation, in particular, requirements for KYC / AML procedures. Of course, investors are concerned about the risks of investing in confidential assets.
Is there a future for private coins?
There may be a future for private coins, but it is unlikely to be simple and cloudless. XVG price prediction, which is based on the technical analysis of the price chart, looks moderately optimistic. But in fact, many things are almost impossible to predict.
The Tornado Cash ban did not shake the position of privacy coins. They have remained stable and even increased in price a little. However, the US Treasury Department has made it clear that trying to anonymize transactions can bring a lot of trouble.
Privacy coins are not very welcome right now, so it is hardly possible to expect a more loyal attitude towards them. The next step in their direction can follow at any moment and it can be anything, including making them illegal.
This may not happen until such coins are not very user-friendly and the demand for them is low. As soon as their popularity begins to grow, there will be a reaction from the regulators.
The risks and possible consequences of investing in confidential coins are still unpredictable. If people plan to invest them, they should follow the news carefully. It is possible that in the relatively near future holders will not be able to use their money.