- Privacy token liquidity drops to a new all-time low.
- Kaiko attributes falling privacy token liquidity to exchange delistings.
- The future of privacy tokens is uncertain.
Financial regulators continue cracking down on cryptocurrency anonymity, putting pressure on privacy tokens. As a result, major exchanges are increasingly delisting or restricting trading for privacy tokens. In December, OKX compounded the issue by axing multiple privacy-focused tokens, including Monero, ZCash, and Dash, leading to record low privacy token liquidity.
Privacy Token Liquidity Dries Up
According to data from Kaiko, privacy token liquidity sunk to an all-time low of just $5 million, based on a 1% market depth measurement. Kaiko attributed the liquidity slump to OKX’s December delisting, which removed several privacy tokens from the platform’s offerings.
Market depth is a measure of liquidity in an asset that shows how the price will be affected by a new order. In Kaiko’s case, it measures the total value of buy and sell orders outstanding on exchanges within a 1% deviation of the current price.
The same metric registered a $34 million 1% market depth in November 2021, when crypto markets were booming and less burdened by regulatory crackdowns. However, privacy token market depth has declined since then, with sharp drops coinciding with major bearish events such as the Terra crash in May 2022 and the FTX scandal in November 2022.
OKX Delists Raft of Privacy Tokens
Late December 2023 saw OKX announce the removal of several tokens from its platform, including major privacy coins such as Monero (XMR), Zcash (ZEC), and Dash (DASH). While the exchange attributed the decision to user feedback and failure to adhere to guidelines, some believe that Financial Action Task Force (FATF) pressure was behind the delisting of the privacy tokens.
FAFT guidelines call for exchanges to combat money laundering and terrorist financing by sharing originator and beneficiary information on crypto transactions. The agency also labels privacy-centric cryptocurrencies that can obscure the flow of funds a “red flag” for authorities to watch out for.
On the Flipside
- In June 2023, FATF warned that three-quarters of jurisdictions had failed to fully adopt its guidelines.
- Lower liquidity leads to higher volatility and slippage, making trading more difficult.
- It seems privacy cannot be reconciled with regulatory compliance, casting doubt on the case for privacy-focused tokens.
Why This Matters
The evaporating liquidity for leading privacy coins is the latest sign of the growing threat to their long-term viability. With exchanges and regulators continuing to crack down, the future for privacy tokens looks bleak.
Read about allegations of Ocean Mining being complicit in censoring Bitcoin transactions here:
Bitcoin Privacy at Risk: Ocean Mining Accused of Censorship
Find out more on Bitboy’s protest in support of the Bitcoin ETF here:
Bitboy “Not Leaving” SEC Offices Until Bitcoin ETF Approved