Shielded ZEC withdrawals on Gemini turn out not to be private since regulators can still see them as we are reading more in our Zcash news today.
Zcash is fully compliant with the anti-money laundering laws and all of the FATF recommendations which cause problems for the privacy of the coin. However, regulators can still see the “shielded ZEC withdrawals” you made. The research suggests that about 0.09% of ZEC transactions in any given month are shielded by Gemini announced that they will be adding the shielded ZEC withdrawal addresses in order to increase the privacy for the users. Even though these can be private, Gemini will continue to use the transparent ZEC addresses to store the assets of the users. They will have to do this if they aim to comply with the FATF recommendations.
Today, @Gemini announced support for shielded Zcash withdrawals. This is an important milestone for financial privacy and shows that Zcash’s confidential transactions are compliant with NYDFS regulations. https://t.co/CB1cy4tXxb#Zcash $ZEC
— Electric Coin Company (@ElectricCoinCo) September 29, 2020
Zcash’s regulatory brief explained how the virtual asset service providers such as the Gemini crypto exchange will remain in compliance with the AML Requirements:
“Zcash has been designed to be compatible with the AML / CFT measures recommended by the Financial Action Task Force on Money Laundering (FATF), including customer due diligence, record-keeping, reporting suspicious transactions, and providing required originator and beneficiary information for virtual asset transfers between VASPs (often referred to as the “Travel Rule”).”
The transactions between shielded addresses can be considered private but all of the transactions into and out of the exchange get recorded and reported to the regulators when necessary which means that shielded addresses will not improve the customers’ privacy at all. Regardless, this is a step in the right direction as Gemini decided to support withdrawals to shielded addresses which will make the user experience smoother. Instead of forcing the users to transfer to a transparent address, Gemini helps users skip one step in this process.
While Zcash is a privacy-based cryptocurrency, it doesn’t have the features that are enabled by default. The research from Carnegie Mellon University shows that 99% of the users fail to leverage the privacy of the coin correctly. Other privacy-based assets such as Monero have privacy features that are enabled by default which is a consideration of the Zcash’s leadership that pondered since 2018.
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