Monero’s encryption tech, which makes use of signatures from several different users to conceal who has carried out a monetary transfer, has reportedly not been hacked by any nation (at least it has not been widely reported).
As reported by Fast Company, analysts with the Counter Extremism Project claim that they were used to seeing various radical groups requesting donations in cryptocurrencies.
Neo-Nazis, so-called ISIS sympathizers/supporters preferred Bitcoin, as it has been touted as a way to avoid excessive monitoring from banking institutions and regulatory agencies.
However, in 2020, the entities tasked with monitoring the activities of online hate groups witnessed a “pro-ISIS” group change its donation method from Bitcoin (BTC), the flagship cryptocurrency, to Monero (XMR).
Other entities seemed to have followed this trend as well, because all of a sudden it appeared, that Islamic extremist groups and even white nationalist organizations had been requesting for donations in Monero (XMR), one of the most well-developed privacy coins in the crypto space.
Hans-Jakob Schindler, Senior Director of Counter Extremism Project, said that about a year and a half back, “this Monero thing took off, and now it’s pretty widespread.”
However, it’s worth clarifying that Monero (XMR) transactions have been relatively common in the crypto sector for at least the past 5 years (which is quite a long time for the nascent industry).
When analysts tried to figure out why people are opting for XMR, the reason became clear.
Monero is described as a privacy coin, which is essentially a type of virtual currency where entities on both sides of the transfer remain anonymous.
This was identified as a major area for concern by Schindler and his colleagues.
But they are not the only ones who seem to be concerned. Binance, the world’s largest digital asset exchange that has been sued by US authorities for a wide range of issues, recently revealed that it will be delisting Monero and other so-called privacy coins in several European nations due to heightened regulatory scrutiny in 2023 (following major events last year like the spectacular collapse of FTX among many other crypto-related businesses).
In 2023, Dubai also announced its decisision to place a ban privacy coins, after similar developments in Australia, Japan, and South Korea. Despite these developments, privacy-coins are still legal in the US, a country that has recently taken a rather hostile and aggressive stance towards the crypto sector by going after big names like Binance.US, Coinbase, Kraken, among many other crypto service providers.
Virtual currencies such as Bitcoin, which has consistently maintained the largest market cap among the over 5,000+ cryptos, display a particular user’s digital transactions on the blockchain.
However, when it comes to privacy coins such as Monero, Zcash (ZEC), and Dash (a project that claims it is not offering a privacy coin), they protect a user’s identity by leveraging a range of cryptograpic methods.
For instance, Monero is quite possibly the most private of all such coins, since its default setting is set to anonymous. In comparison, other digital currencies merely feature anonymity as an option the user can select when performing such transfers.
The platform, which is represented as an open-source/non-profit ecosystem, is supported by a growing number of users who would like to remain anonymous. This may include people who want to avoid having their activities tracked while shopping for goods and services online.
Another reason for using privacy-oriented coins could be to prevent competitors and other service providers from knowing exactly how much was paid for a particular item at an online store.
Although these issues/preferences might not appear to serve as the primary motivation to transforming the traditional financial sector, at its fundamental level, privacy coin creators desire a system that is (ideally) free from political interference, which often gets blamed for destabilizing entire economies and fiat currencies.
This type of monetary/financial freedom also tends to make privacy coins particularly useful for carrying out illicit transactions.
Privacy coins, for the most part, and Monero in particular, are also considered to be highly secure, according to industry experts.
The developers of this crypto token leverage ring signature encryption, which incorporates signatures from several different clients in order to conceal who has actually initiated a particular transfer.
Notably, Monero (XMR) encryption tech has not yet been broken (at the protocol level) by any nation. This, according to Schindler’s research.
Due to this reason, regulatory authorities may be concerned about who used the money and for what purpose. At present, it is not certain for just how long privacy coins could remain private in the United States.
However, the Secret Service has asked Congress to look into the possibility of regulating them. And the Internal Revenue Service (IRS) reportedly offered a $625,000 reward to anybody who would be able to crack Monero’s privacy technology and associated protocols.
Schindler’s organization doesn’t support the idea of placing a ban on privacy coins. But they would like the crypto exchanges to retain a client’s personally-identifying information, because these details may be handed over to regulatory authorities whenever they’re needed.
Schindler explained:
“You do need inherent security controls. And that will only be possible to build into the system if there is motivation, and the only way to create motivation is for there to be liability and regulation.”
However, proponents of privacy rights are not too fond of excessive government involvement/intervention.
And when you think about it, then how is all this different from cash-based transactions, which offers the most anonymous user experience that has ever been created.
Despite its potentially private nature, cash does have its inherent limitations. For example, it tends to be quite heavy and can be difficult to physically move, particularly across international borders (due to varying regulatory requirements in different jurisdictions).