Bitcoin is being forced to share the cryptocurrency market as developers are coming up with an array of alternative digital currencies. These coins are quick to gain popularity as the developers are laboring over to design digital cash that can be prominent in conventional commerce and finance.
One of the most prominent of these “altcoins” is Monero, which is dubbed as the “privacy coin” due to the total anonymity it offers to its users. It is crafty in putting up a veil on all the transaction details of its users, thus making it a useful tool in illegal activities.
It came out in 2014 and as quickly climbed the ladder of fame and is now ranked as the 12th biggest cryptocurrency by market capitalization. It has a circulation of a whopping $1.4 billion worth.
What makes Monero differing from Bitcoin?
Monero offers near-complete privacy to users. It does so by concealing the value of transaction made and the digital address of the senders and the receivers. This means that the users can exchange the flow of digital cash without leaving a trace behind.
In contrast to this, Bitcoins are more likely to be described as “opaque” rather than being transparent. They do hide the identity of the owners of the digital wallets being used by not making them public. However, the details of the transaction remain permanently recorded on the blockchain.
Coming up with clues to from these details and eventually finding out the identity of the users have become a reasonably easy task with the advent of organizations which specialize in analyzing blockchain transactions.
Why it is so popular?
Monero is exceedingly popular amongst criminals for carrying out illegal activities. Most of the criminals have started dealing in cryptocurrencies. Such was the case when the wife of a wealthy businessman was kidnapped in Norway. The Norwegian police reported that the criminals are demanding ransom in Monero.
Apart from this event, as reported by law enforcement agencies and cybersecurity experts, the use of Monero has also been linked to many other illicit activities such as buying contraband to laundering money.
Monero has earned a special place in the darkest markets. It plays a unique role in the use of buying illicit goods- let it be drugs or stolen credit cards, as said by Tom Robinson- the chief data officer at Elliptic – a London based law firm that provides blockchain tracking software services law enforcement agencies and other private companies.
According to Francisco Cabanas- the developers of Monero claim that it plays as much of a role in crime as does regular cash. They demand that Monero stays out of debates on its traceability or the risks its decentralized nature poses.
“It doesn’t selectively encourage crime, it encourages commerce,” said Cabanas, who goes by the nickname “ArcticMine,” in an interview via Skype from Vancouver. “In that respect, it’s no different to cash.”
Monero is also known to play an active role in “cryptojacking” or other illegitimate cryptocurrency mining where the hackers infiltrate computer devices to mine new coins.
Nonetheless, as reported by Guillermo Suares de Tangil, a cybersecurity lecturer at King’s College London and a researcher of Monero, over 4 percent of 17 million Monero in circulation were mined using malware.
“There is a clear phenomenon of the underground using Monero, and selling malware that will contribute to Monero mining,” he said.
The bright side to Monero, as posed by the developers is that it can be a useful tool for companies that are in search of maintaining financial secrecy. Furthermore, it can be used by people living in repressive countries to avoid censorship or surveillance.
Are the law agencies concerned? What is the regulator’s opinion?
Cryptocurrencies are often unregulated. However, countries like Britain to the Unites States are searching for ways to deal with this phenomenon- but only a few could come up with some strategies. When asked about Monero, Borja Pastor de la Morena, an official at Europol in The Hague who oversees the agency’s work on money laundering said:
“This kind of alternative cryptocurrency is more opaque and better at concealing the activity of the users.”
He said: “It’s a phenomenon that we are paying attention to”
Although the evident use of Monero in money laundering is present, only a few financial, national level regulators have bothered to address the issue.
Britain’s finance ministry- which is researching ways on if and how Britain will regulate cryptocurrencies, inform that it was unaware of the use of Monero by criminals.
“We recognize the risks with crypto assets like ‘privacy coins’ being used for illicit activity,” a spokesperson said.
He furthermore said that it would “soon” launch a consultation on highlighting crypto-related companies under anti-money laundering regulations.
However, Japan’s financial watchdog, who is privy to money laundering potential of privacy coins, requested the Tokyo-based exchange to go through its listings last year. This exchange later halted the trade of Monero.
Who really controls Monero?
Understanding a cryptocurrency that is apt on gaining anonymity is a hard task, which is why information regarding the use of Monero is scarce.
According to the website- CoinMetrics, daily transactions of Monero, that is one proxy of how much the cryptocurrency is used, mostly revolves around 8,000 in this month only. A total of about 5000 active digital wallets are available for Monero.
In contrast to this, bitcoin goes through with almost 320000 transactions per day and has about 785,000 active addresses.
Apart from Monero, other privacy coins have also emerged in the market, such as ZCash. Their other speculative features also add up to their popularity, but the critical element is the privacy they offer.
The world’s largest crypto asset manager – Grayscale, which has almost $1.3 billion under management, supports the investors to invest in ZCash.
With such popularity of “privacy coins,” some of the significant exchanges lists, such as the Malta-based Binance- one of the largest exchanges in the world encourages traders to trade the coin.
Although Binance has declined any comment on Monero, it has assured that it evaluates coins and tokens for listing through a comprehensive review process and that it carries out timely reviews on projects.