What is a privacy coin?

A privacy coin is a cryptocurrency designed to hide the details of transactions. On most blockchains, including those of bitcoin and Ethereum, every payment is public: anyone can see the sending address, the receiving address and the amount. Privacy coins use cryptography to conceal some or all of that information.

Why do privacy coins exist?

Bitcoin is pseudonymous, not anonymous. Addresses are strings of characters, not names, but once an address is linked to a person, their history can be followed. Specialist firms do this routinely, as the guide on whether cryptocurrency can be traced explains.

Supporters of privacy coins argue that financial privacy is normal. Cash leaves no public record, and bank statements are not published. They say businesses should not have to show competitors their payments, and that people under repressive governments have reason to keep donations out of view.

How do they hide transactions?

The two leading coins take different approaches.

• Monero, launched in 2014, makes privacy mandatory. Ring signatures mix the real sender with decoys. Stealth addresses create a one-time destination for each payment. A third technique hides the amount.
• Zcash, launched in 2016, makes privacy optional. It uses zero-knowledge proofs, a form of cryptography that lets the network confirm a transaction is valid without seeing its contents. Users can choose "shielded" addresses, which are private, or transparent ones that work like bitcoin's.

Neither is a guarantee. Researchers have found weaknesses in both systems over the years, and user mistakes can expose activity.

Are privacy coins legal?

In most countries, including the United States, holding a privacy coin is not against the law. The pressure falls on the companies that trade them. Exchanges must follow anti-money-laundering rules that require them to know their customers and monitor where funds come from, which is hard when transactions are hidden.

Regulators and police point to the use of privacy coins in ransomware, darknet markets and money laundering. Financial regulators in Japan in 2018 and South Korea in 2021 required licensed exchanges to remove them.

The European Union's Anti-Money Laundering Regulation, which applies from July 10, 2027, prohibits banks and crypto-asset service providers from keeping anonymous accounts or handling anonymity-enhancing coins.

Laws differ by country and change, so readers should check the official source or a qualified professional for their own situation.

Why have exchanges delisted them?

Many exchanges have removed privacy coins without waiting for a ban. Binance delisted Monero in February 2024. Kraken stopped trading it for customers in the European Economic Area at the end of October 2024, citing regulatory changes.

The effect is that privacy coins are harder to buy and sell through regulated companies, and more trading happens on smaller venues and decentralized exchanges. Critics of the delistings say this pushes ordinary users away from supervised platforms without stopping criminals. Regulators reply that licensed firms cannot offer assets they are unable to monitor.