- Monero’s “Fluffypony” and Perkins Coie have presented a whitepaper after 18 months of work.
- The whitepaper concludes that the use of Monero presents less risk to authorities than other payment methods.
Former Monero (XMR) lead maintainer Riccardo Spagni, known in crypto space as ‘Fluffypony’, has presented the result of more than a year’s work. Together with the law firm Perkins Coie and developers from Tari Labs, the whitepaper “Anti-Money Laundering Regulation of Privacy-Enabling Cryptocurrencies” has been published. The document has been conceived as a new legal framework in defense of privacy coins such as Monero, Zcash, Dash and Komodo, among others.
In this way, the document presented by the legal firm and the developers seeks to address the conflict that has forced several crypto exchanges around the world to remove them from their portfolio. According to the Whitepaper, it is possible that regulated entities, referred to in the document as virtual asset service providers (VASPs), to comply with the authorities’ demands while supporting privacy coins.
In addition, the Whitepaper has set out to disprove the “unsubstantiated belief” that privacy coins are incompatible with anti-money laundering (AML) regulations. In fact, the paper states that privacy features protect consumers who do not want to expose their financial data to a third party. In addition, the Whitepaper states that in business terms, privacy is “critical to protecting the status quo” of operation in the current financial system. In that sense, it states the following:
Privacy coins essentially combine the benefits that the traditional financial system and initial cryptocurrencies like Bitcoin offered.
Therefore, privacy coins such as Monero are a payment method that allows the consumer to protect their financial information without sacrificing utility and convenience. Reaffirming that they are part of a user’s right, the Whitepaper claims that Monero and other privacy coins enable a transaction method with privacy that was previously only possible through financial intermediaries and other agents of the traditional financial system.
Monero proposes a balance between the use of privacy coins and regulations
The document also highlights that the use of privacy coins has been increasing in recent years. Along with this, there has also been a rise in the use of solutions in the crypto ecosystem that increase the privacy capabilities of a given blockchain. For example, Bitcoin has increased its use of CoinJoin transactions, a method to add privacy with BTC transactions. Therefore, the following is proposed:
Allowing VASPs to support privacy tokens under current, tested AML regulations strikes the appropriate policy balance between preventing money laundering and allowing beneficial, privacy-preserving technology to develop.
The regulations demanded to VASPs, the Whitepaper notes, are already sufficient to cover the potential risks involved in the use of privacy coins. Compared to other forms of payment (cash, cards, paper-based payment instruments), privacy coins have a “lower risk of ease of crossing borders”. Monero and others have an advantage that the other means mentioned do not possess, the document indicates, their transactions are issued in a public blockchain. The Whitepaper concludes:
(…) privacy coins do not pose an inherent AML risk that is uniquely or unmanageably high, since that risk does not appear materially greater than other high-risk traditional products that VASPs have long supported in a responsible and compliant manner.