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The South Korean cryptocurrency exchange is delisting Dash, along with Monero, Zcash, Horizon, and Super Bitcoin on October 10th citing that they do not comply with Financial Action Task Force rules, joining several exchanges which have recently delisted privacy coins.
In the official announcement from OKex, they cite that the first General Assembly and the International Anti-Money Laundering Organization (FATF) agreed to the Virtual Asset Service Providers rules, which “recommends that exchanges be able to collect relevant information such as the name and address of the sender and recipient of the virtual asset”. This is called the “travel rule” by OKex and since they cannot collect this information on privacy coins, they decided to delist the coins.
However, an “OKEx spokesperson told The Block that the decision applies only for its Korea unit and not globally”. Nevertheless, the move follows a trend of more exchanges delisting privacy coins. Upbit, another South Korean exchange announced their intention to delist Monero, DASH, ZCash, Haven, BitTube, and PIVX by September 30th. Additionally, U.K.-based exchange, CEX.io announced last month that they will be delisting Dash and Zcash.
Dash’s education problem to regulators on its privacy functions
These recent actions in the delisting of privacy coins displays a fundamental misunderstanding on how Dash in particular functions. Dash has a unique privacy function by offering users the optional PrivateSend feature, however this only mixes funds and obscures user and transaction data from correlation to data on the blockchain, rather than hiding the entire transaction from public view, as is the case with encryption-based coins. Ryan Taylor, CEO of Dash Core, has previously said that from a regulation standpoint, Dash is no different than mixing Bitcoin transactions going through coin mixing and should not be treated any differently.
Additionally, Dash is now listed on the entire Coinbase platform, which services U.S. citizens and is one of the world’s toughest and costliest financial regulatory environments. This serves as validation of Dash’s compliance, and may serve as an example case for other platforms looking at the project in the future.
Unintended consequences of delistings may include the rise of decentralized exchanges
The growing regulatory pressure on exchanges to delist privacy coins may have the unintended consequence in feeding the growth of decentralized exchanges. The Financial Action Task Force (FATF) announced its rules in June, and was organized in an attempt to create a global precedent with cryptocurrency regulations. While their rules are officially only “recommendations”, the governments behind the organization have the power to blacklist countries and/or particular banks from the global banking system if they choose not to comply. Some analysts have already pointed out that these “recommendations” could backfire by “applying bank regulations to this industry [cryptocurrency] could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement”.
Decentralized exchanges have already been on the rise with not only more consumer options, but also more user friendly interfaces to make them easier to use for less technical cryptocurrency users, such as DynX or Komodo AtomicDEX. This will enable consumers to still get access to the coins they desire despite government attempts to limit their choices.