The EU's proposed ban on privacy coins like Monero isn't just about cracking down on criminals. It’s caught between competing desires, a high-stakes gamble, a bet that absolute transparency should be placed above individual liberty and technological advancement. Quite honestly, I think they’re playing from a profoundly losing hand.
The core argument boils down to this: the EU wants to build a financial safety net, preventing illicit activities like money laundering and terrorist financing. No one can fight that in theory. Here’s the kicker – their solution is a nationwide, sweeping ban on privacy-enhancing technologies. It seems like overkill—using a sledgehammer to crack a nut. A travesty, I should add, that happens to contain the seeds of future innovation.
Are they truly solving anything?
Let's be realistic. Criminals aren't stupid. They’re not going to be hanging around with regulated exchanges and traceable cryptocurrencies. This unnecessary ban will do nothing to stop illegal activity. Rather, it will push it further underground, into unregulated exchanges and the darknet market shadows. Ironically, it does the opposite — makes tracking these activities more difficult, not less.
Think about it: the EU's AML regulations are already driving many smaller players out of the market, consolidating power in the hands of a few large, centralized exchanges. This flies in the face of prudent infrastructure design as it creates a single point of failure, a honey pot for hackers and a systemic source of risk. Today criminals are incentivized to seek out more arcane approaches. This has combined to develop a perfect storm of unsafe and confounding circumstances.
It's like the war on drugs. Prohibition for the past decades has not stopped people from using drugs, it has just made the drug market more lucrative and dangerous for cartels. Are we fated to make the same mistakes with cryptocurrency?
Innovation strangled in its crib?
The fixation on their use in illicit activities misses the point that the vast majority of privacy coin transactions are perfectly legitimate. Privacy is not inherently malicious. It’s a little known but critical right, one that defends people and companies alike from the government’s watchful gaze and possible coercive manipulation.
Now imagine a journalist writing about corruption in a CPI country under a totalitarian regime. Or a climate or environmental justice stakeholder trying to improve the lives of their community members. Or just a small business owner who prefers to keep their financial data private from competitors. These are all great, positive uses of privacy-enhancing technologies.
The EU’s decision to ban Monero and other privacy coins demonstrates a clear message. At the very least, they are announcing that privacy is the new luxury we can’t afford. I would contend that it’s more than just a nicety, particularly in an era of expanding surveillance and data breaches.
Additionally, beyond a doubt, this ban will have a stifling impact on innovation. As with so many other issues, the blockchain space is still in its infancy, and privacy-enhancing technologies are key to making it an appropriate alternative. By stifling innovation in this area, the EU is hindering the development of new and beneficial applications that could revolutionize industries from finance to healthcare.
It would be as absurd as banning encryption because it is useful to terrorists. We understand encryption can be used to plan illegal and harmful activities. In addition to that, it’s foundational to protecting our email correspondence, online banking and personal information. A blanket ban would not just seriously undermine the internet, it would make us all less secure.
Regulation or innovation, must we choose?
The EU’s approach seems more like a knee-jerk reaction, a blunt instrument swung without regard to what might happen. There are more effective, less damaging solutions available that would better serve the EU’s AML objectives while fostering rather than strangling innovation.
The EU should raise the due diligence standard towards any crypto exchanges and service providers. This targeted approach is much more effective than an arbitrary statewide ban. They could require operators to use transaction monitoring systems that can flag suspicious activity without compromising the privacy of their legitimate users. They can work with the crypto industry to create new pathways that solve AML concerns while creating something completely new.
The answer lies in balancing the need for security with respect for freedom, and regulation with technological innovation. We need to keep our honest financial institutions safe from bad actors. Of course, we don’t want to sacrifice our basic freedoms or halt the progress of innovations that will change our world for the better.
The EU’s current approach would be throwing the baby out with the bathwater. This policy is irresponsible and shortsighted and will not achieve the goals it claims to. More importantly, it will cripple the entire blockchain ecosystem.
Ultimately, the EU needs to ask itself: are they building a safety net, or a cage? At least, like the former – because right now, it sure seems an awful lot like the latter. Those impacts in the long-term may be much more harmful than they think. The road to financial hell is paved with good intentions. If so, this ban would be one of the first bricks in that path. Wake up, EU!
