The rise of privacy coins: We only care when privacy is at risk

Disclosure: The views and opinions expressed here are solely those of the author and do not necessarily represent the views and opinions of crypto.news editorial.

Summer. Sunlight filters through my curtains. The weather forecast predicts one of the hottest days of the year, but the weight of the earth crushes me, I remain frozen in bed, unwilling to move. My phone screen lights up and the first headline catches my eye: “29-year-old Bitcoin user robbed and killed for $200,000 in Bitcoin in Kiev.” The warmth outside feels distant compared to the chilling awareness that danger is hiding in plain sight in a world where privacy is increasingly elusive.

The story offered no insight into how the criminals discovered the man’s Bitcoin (BTC) holdings. However, the fact that the alleged attackers were charged with premeditated murder, robbery and concealment indicates that they managed to track and know sensitive information about the victim’s BTC.

Privacy is not just a convenience; this is a fundamental right

After reading the news, I was reminded of Neeraj Agrawal’s guest article in Bankless magazine titled “Crypto Privacy is a Humanitarian Purpose.” Agrawal convincingly argues for the critical role of privacy tools in today’s world, highlighting how “cryptoprivacy can be a matter of life and death” for individuals living under oppressive governments. He cites several examples of how the ability to maintain privacy through cryptocurrency provides a vital way to evade oppressive financial restrictions imposed by powerful intermediaries.

Examples include protesters in countries like Belarus and Nigeria, political opposition in Russia, resistance fighters in Myanmar, Afghan civilians struggling under sanctions, and a Chinese artist evading censorship.

Agrawal’s points highlight that privacy is not just a convenience but also a matter of survival for many people around the world. However, focusing only on these extreme cases may lead to the false perception that privacy is only necessary in difficult situations. In reality, privacy is a fundamental right that should not require justification. This narrative also reinforces the idea that those who seek privacy or resist Know Your Customer protocols must be hiding something illegal, further stigmatizing the pursuit of personal privacy.

The dominant narrative tends to position privacy concerns on a spectrum: criminals hiding illegal activities on the one hand, and activists and freedom fighters fleeing persecution on the other. Both are seen as operating outside the law, but one is demonized while the other is celebrated, even when the laws are oppressive or unjust. But this dichotomy overlooks the vast majority of people caught in the middle; Average individuals who value their privacy without a dramatic backstory to justify it or anything to hide.

Privacy is like oxygen: Its value is only revealed in its absence

The growing popularity of privacy-focused cryptocurrencies appears to be closely linked to the increasing number of central banks exploring central bank digital currency. According to a Bank for International Settlements survey, 94% of 86 participating banks said they were looking at a digital version of their national currencies. This rate is higher than 90% of the 81 participants in the survey conducted by BIS, the umbrella organization of the world’s central banks, in 2021. In response to growing concerns about the erosion of financial privacy, privacy coins have emerged as a potential solution.

Additionally, privacy-focused cryptocurrencies only attract media attention when our privacy is violated. For example, Ethereum (ETH) co-founder Vitalik Buterin emphasized the need for privacy in cryptocurrency transactions following reports that he used the RailGun privacy tool to hide 100 ETH transfers. According to Wu Blockchain, citing data from Arkham Intelligence, Buterin had been gradually engaging with the privacy tool using smaller amounts of ETH over the past six months.

Vitalik Buterin (vitalik.eth) transferred 100 ETH (approximately $325,000) to Railgun today at 17:40 UTC+8. Railgun is an EVM privacy protocol that enables DeFi private transactions. For the past six months Vitalik Buterin has been interacting with Railgun using small arms…

— Wu Blockchain (@WuBlockchain) April 15, 2024

Following news of Buterin’s actions, privacy-focused digital assets like Monero (XMR) saw an immediate increase in value, with the average price increase being more than 5%. Despite their critical role in ensuring financial privacy, proponents of privacy protocols are often labeled and viewed as paranoid conspiracy theorists or extremists.

Society is suspicious of anyone who does not comply with the norm of transparency. This shaming of privacy-conscious individuals serves as a subtle tool for social control and normalizes indifference. From here it is a slippery slope towards a surveillance-focused society where personal data is easily collected, manipulated and used as a tool of control.

How big are crypto crimes really?

While some actions, such as fraud and hacking, harm honest users, other actions, such as circumventing government-imposed capital controls, can appear to defy unfair systems. Critics of privacy-focused cryptocurrencies often focus on their use for illegal activities but fail to put the issue in a broader context. Blaming tools rather than addressing underlying human behavior misses the point.

Illegal activities have been occurring for centuries and are not specific to any one technology. Although crypto can be used for illegal purposes, these actions will continue with or without crypto. The focus should be on addressing the root causes of these problems, not on disparaging the tools themselves.

According to the UN Office on Drugs and Crime, traditional financial systems are responsible for up to $2 trillion a year in money laundering. This figure is comparable to the total market value of almost all cryptocurrencies. Additionally, over 99.9999% of Bitcoin transactions occur on exchanges that comply with anti-money laundering regulations.

In January 2023, Chainalytics reported that cryptocurrency transactions tied to illegal addresses totaled $24.2 billion, accounting for only 0.34% of this year’s total crypto transaction volume. This marks a decrease from 2022, when illicit activities accounted for $39.6 billion, or 0.42% of transactions.

One of the challenges in analyzing the scope of illicit activity is the distinction between crypto holders and those actively using it for transactions. Many users acquire BTC only to hold it for long-term investment purposes; This means that a higher percentage of active users may be involved in illegal transactions. This inconsistency adds complexity to the ongoing debate over crypto regulation.

However, it is ridiculous to claim that the majority of privacy coin holders engage in illegal activities. This narrative undermines the core principles that drive many web3 natives: basic human rights to freedom and privacy being one of them. For these individuals, privacy is not just a shield against bad actors or invasive authorities; it is a form of liberation, a way to claim autonomy over personal data and transactions. They do not hide illegal behavior, but they insist on their belief that privacy is a fundamental human right and should not be endangered or criminalized.

The idea that the pursuit of privacy implies wrongdoing is a dangerous oversimplification. Just as freedom of expression and the right to assembly are protected no matter how they are exercised, privacy deserves the same unconditional respect.

Quinten van Welzen

Quinten van Welzen is the marketing and community lead for Zano, a layer-1 blockchain dedicated to privacy and security. With a career spanning over five years in the crypto industry, Quinten is dedicated to advancing blockchain technologies and their privacy-enhancing applications. Originally from the Netherlands, Quinten entered the crypto space in 2017 due to his deep interest in blockchain technology and its potential to revolutionize various aspects of digital privacy and security. Quinten’s work at Zano not only leverages these technical strengths, but also involves building a strong and knowledgeable community around Zano’s innovations.