What crippled crypto anonymity in 2018?
2018 was a trying period for a lot of crypto businesses and holders of digital currencies. Despite a steep drop in price, Bitcoin is still holding the #1 position from a capital intensity and fiat value standpoints. Even so, Bitcoin’s nosedive did not go unnoticed - the eco-system saw quite a number of companies and users leave the space, very much like it happens through a natural selection. Pricing volatility was just one of the most pressing concerns. There were a few more precedents that gave food for thought and made us question if there is a future for anonymous payments in 2019.
Some events of 2018 that pose a threat to your financial privacy in 2019
January, 2018 - Bitfury Group debuts its brand new regtech solution Crystal
There is no telling if Crystal has the edge over Chainalysis’, Elliptic’s, Ciphertrace’s products as far as deanonymization and cybercrime intelligence go…However, Crystal can win audiences by packing all things in one - it has risk scoring, autonomous tracking of suspicious addresses/wallets/transactions, and an integration-friendly architecture. Without a deep-dive into Crystal’s work, a cluster analysis and tracking wallets with the remaining change can be named its cornerstone. Crystal is one of the products whose emergence on the market could not have been more timely - with such a ubiquitous regulation enforcement in 2018, the software is likely to proliferate in use in 2019. This can mean only one thing - there is a good chance your coins might end up in Crystal’s database and carry far-reaching implications, even if there were no illicit intentions on your end. Such is a nature of cryptocurrencies - there is a long use history behind each coin. Services like Crystal exploit this and can make you account for some bad actors’ deeds.
April, 2018 - a Reddit post mentions that peer-to-peer crypto trading platform Localbitcoins is introducing KYC/AML
Users with significant trading volumes started getting warning messages saying they had to verify themselves. Localbitcoins chose not to give official comments but went straight to updating their ToS where it was pointed out that ID verification would be required on a case-by-case basis. The platform’s decision to deploy AML/KYC practices triggered a user backlash and a search for a service where privacy is still a value.
Since April, 2018 the SEC has been at work carrying out its regulation promises and threats
The SEC made a few first attempts to force crypto platforms to register as established in their national securities exchange oversight framework. They also literally went all out to fight fake ICOs, made enquiries and sent requests for information to stock exchanges, crypto-funds to enable investigations. In a word, they started really delving into the crypto space. OFAC(Office of Foreign Assets Control) declared they were considering the practice of starting to add addresses to sanctions lists.
The rest of world’s attitude to stepping up regulatory efforts varies from country to country. While China’s government had front-row seats in the decision to block over 120 foreign cryptocurrency exchanges, Switzerland seems to think the cryptocurrency payment system holds great promise and has not fully realized its potential - see how Cryptofinance are pitching crypto to investors. The UK and Europe took one side on the question of regulations - they are in favor (read more on where other countries stand).
October, 2018 - Chainalysis announces a partnership with Binance - one of the major cryptocurrency exchange platforms
With Binance setting a precedent where a big player bows adopts KYT/AML, the end of 2018 was indeed a turning point … and another lost battle for a free anonymous payment system. Getting on board with the regulatory framework was a strategic business decision, no doubt about that. After all, being friends with Big Brother has its apparent advantages - there is no one else standing in the way of the platform’s expansion on the market now.
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Some predictions for 2019
The global regulatory landscape will be extending its reach. Blockchain is way more transparent and informative than the traditional financial system - this will only fuel governments’ desire to have it under control. Regulators will use blockchain’s data to facilitate official investigations and account for the use of sanctions against organizations or persons.
More and more crypto platforms and services will follow Binance’s lead. It is a matter of survival.
Very soon Big Brother will deal with anonymous coins and wallets. Therefore, they will just fall by the wayside.
2019 will start a final countdown for anonymous payments. To retain your financial privacy, you will have to look for services with the strongest tech to hamper modern deanonymization methods (read more about modern deanonymization tools here)