France’s National Assembly Finance Head has announced that the country wants to ban anonymous cryptocurrencies. The news comes off the back of Emmanuel Macron stating that blockchain could help traceability in agriculture. Whether blockchain or DLT is necessary for this is still up for debate. The usual tropes were wheeled out about cryptocurrencies including money laundering and tax evasion – the go-to issues for any government criticism of cryptocurrencies. But banning anonymous cryptocurrencies won’t necessarily kill them.
The price of such cryptocurrencies would be reduced and their volume would drop. They could be removed from trading on exchanges as well. However, unless technology is created whereby these anonymous cryptocurrencies can be tracked, then there is nothing to stop a black market rising and people moving to OTC trading.
Therefore, the current method of exchanges allowing for the trading of such privacy coins actually reduces their anonymity through KYC procedures. Remove this, and tracing privacy coins becomes even more difficult.
There is little shock that the French government would like to try and remove the anonymity surrounding cryptocurrencies. Coin Rivet recently reported on the reduction of cash in society. One key aspect of the reduction of cash for governments is that as payments move to a more electronic system, they become easier to track. Not only is this ideal for keeping a close eye on citizens, it also allows big businesses to trace our spending habits. The retaliation of privacy coins reduces this. The payments remain electronic, but they are not traceable. There are many fans and builders of Bitcoin who hope to add more privacy features on top. This is for fear of the traceability of the Bitcoin blockchain.
The value of privacy coins does not lie in their fiat equivalent. The value lies in being able to send transactions anywhere anonymously. Even if their fiat value were to drop, there could still be enough demand for such cryptocurrencies. In effect, governments could shoot themselves in the foot if they follow through with banning anonymous cryptocurrencies.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.