Cryptographers Are Always Going to Be 'One Step Ahead' of Regulators: Monero's Spagni

Oct 19, 2020 at 18:42 UTCUpdated Oct 19, 2020 at 20:16 UTC.While regulators are trying to restrict privacy in crypto, their efforts may be futile, according to privacy-centric protocol Monero's maintainer, Riccardo "Fluffypony" Spagni.

"The U.S. Internal Revenue Service wants the same level of insight as they have over digital dollars in bank accounts; however, cryptographers and researchers are always going to be one step ahead on privacy," Spagni told CoinDesk.

Protocols offering privacy have become the focal point of regulators and law enforcement agencies when the race among central banks to launch sovereign digital currencies is heating up.

The IRS recently hired blockchain analytics firms Chainalysis and Integra FEC to develop transaction tracing tools for monero and layer 2 protocols.

Even if regulators succeed in developing some traceability solutions, monero is likely to fix the bugs, retaining privacy over the long run, according to one analyst.

An ideal world solution that limits backdoor entry into privacy protocols for regulators and law enforcement looks out of reach.

Regulators continue to struggle to establish controlled access in traditional finance, where paper money still offers some privacy.

There could be a better middle ground between regulators and privacy cryptocurrencies that facilitate legitimate financial investigations but avoid surveillance.

Monero's price has increased 173% on a year-to-date basis while bitcoin has gained 60% over the same amount of time, according to CoinDesk 20.CipherTrace's Jevans believes monero has largely tracked bitcoin's price, and the recent outperformance is mostly due to chart factors.

"The AML risks of privacy coins, while real, do not require specific, tailored regulations that may pose an unnecessary risk of stifling privacy coins' growth. Rather, virtual assets service providers can adequately address those AML risks by maintaining an effective, risk-based program. Allowing VASPs to support privacy tokens undercurrent, tested AML regulations strike the appropriate policy balance between preventing money laundering and allowing beneficial, privacy-preserving technology to develop," the white paper said.