Last November, the EU’s plans to ban all privacy coins were leaked to the press. The early draft, seen by CoinDesk, would outlaw all “anonymity-enhancing coins.” It has provoked a frenzied debate in parts of the crypto community.
The transparency of blockchain is inherent due to its design, as in the case of a public blockchain, all transactions are recorded in an immutable ledger that is visible to everyone. This is perfect for many use cases but not for others.
One of the early critiques of Bitcoin was that although it was decentralized, its public nature couldn’t offer privacy. Zcash, initially known as Zerocoin, was designed to fix some of the privacy concerns associated with Bitcoin. The project used a form of zero-knowledge proof called zk-SNARKs which allows for transactions to be verified without revealing the recipient, sender, or transaction amount.
Zcash helped create a precedent and a framework. By using zero-knowledge cryptography, they became the first open, permissionless financial system.
Under the leaked EU plans, zcash – and other privacy coins and chains like brūkšnys ir monero – would be outlawed across the EU’s 27 countries. As the EU economy is worth over $16 trillion and contains almost half a billion people, this would be a huge blow to international anonymity. Before the bill becomes law, the European Council and the bloc’s 705-member Parliament must agree upon it.
“There are legitimate needs for anonymity in finance for users at the retail to [the] institutional level. From privacy/personal safety, all the way to protecting competitors from emulating strategic business transactions,” says Alex Pruden, CEO of Aleo. “A flat ban on all anonymity-enhanced crypto protocols would not effectively stop money laundering, as the majority is still done using physical cash or through the traditional financial system.”
Governments Can Be Selective About Privacy
Central banks and governments aren’t always against blockchain-based privacy, especially when it works for them. The so-called “godfather of privacy” and the creator of the Bitcoin predecessor „eCash“, David Chaum, has recently been working with the Swiss National Bank on a prototype privatumą saugantis CBDC (central bank digital currency).
CBDCs are digital versions of fiat money. They are issued and backed by central banks. The purpose of CBDCs is to function as a payment method. They also intended to function as a store of value, similar to physical cash.
The CBDC will combine privacy, scalability, anti-counterfeiting measures, and quantum-resistant cryptography and is based on Chaum’s blind signature technology. Chaum has said his method could prevent the government from tracing people’s use spending. And also allow law enforcement to track criminal funds.
If Chaum’s technology succeeds, there is a clear reason why governments would adopt it. A digital fiat currency that provides the privacy of cash, but the traceability of bank transfers, works for both parties. Because a centralized authority controls CBDCs, they have mostly been a ginčytinas klausimas in the crypto community. Many see CBDCs as an additional means for governments to exert control over the financial system. Cryptocurrencies are specifically designed to counteract this.
Source: https://beincrypto.com/crypto-wants-productive-privacy-governments-often-say-no/