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Life After Binance: Ostracized by CEXs, Where do Privacy Coins Go Next?

Last Updated February 18, 2024 1:12 PM
James Morales
Last Updated February 18, 2024 1:12 PM
By James Morales
Verified by Peter Henn

Key Takeaways

  • Binance will delist Monero on February 20 and ZCash could be next.
  • Without centralized exchanges listing them, privacy coins should experience a drop in liquidity.
  • However, some advocates of the technology have welcomed the news.

In the face of mounting regulatory pressure to crack down on anonymous crypto transactions, Binance was one of the last centralized exchanges (CEX) to still list privacy coins. However, it seems the exchange couldn’t hold out forever and, earlier this month, Binance announced that it would delist Monero. ZCash (ZEC) has also been tagged  for a potential delisting.

Without the boost provided by CEX trading, a dearth of liquidity could pose a major threat to the privacy coin ecosystem. But don’t count them out just yet.

Privacy Coins Beaten but not Defeated

Once Binance delists XMR on February 20, the crypto will lose its most active trading venue for crucial USDT and BTC swaps. 

Of course, some of the major players, including Coinbase, never supported anonymous cryptocurrencies in the first place. Meanwhile, the 3rd most active crypto exchange – Kraken – has delisted Monero (XMR) but not ZCash for customers in the UK. Users in other countries can still trade both.

With Binance out of the equation, the most active Monero exchange is KuCoin (KCS). Meanwhile, HTX (formerly Huobi) is on course to become the most popular ZCash exchange if Binance drops ZEC too.

However, with crypto regulations taking an increasingly hard line against tokens that can be used anonymously, more CEXs may choose to ditch privacy coins going forward.

A Win for Decentralization

While it may look like bad news from the outside, some privacy coin advocates are celebrating Binance’s delisting of Monero.

On the r/Monero subreddit, a debate has been raging between those who lament the drop in liquidity and those for whom centralized exchanges were always anathema to the privacy coin project.

byu/robml  from discussion 

Diehard Monero supporters on the forum argue decentralized modes of exchange are more resistant to censorship and surveillance. 

As one r/Monero contributor proclaimed, the cryptocurrency “has always quietly ignored everything about the existing system.” Accordingly, they questioned, “why would a project whose community has always been against any regulation related to the project even come in contact with the system?”

But if the most zealous Monero users refuse to go anywhere near a CEx, how do they buy XMR?

Alternatives to Centralized Exchanges

For now, Binance users who want to continue trading Monero need only migrate to rival exchanges that still list XMR. Even if all CEXs abandon anonymous cryptos, there are always decentralized alternatives.

Currently, neither Monero nor ZCash can be bridged to other blockchains. As a result,  automated market maker (AMM) protocols like Uniswap (UNI), which power decentralized exchanges (DEXs) on Ethereum (ETH) and other smart contract platforms can’t exchange XMR or ZEC.

Instead, decentralized options for privacy coin trading include atomic swaps and peer-to-peer (P2P) exchanges.

Atomic Swaps vs. P2P Exchanges

Atomic swaps provide a way to trade tokens across different blockchain networks without relying on a centralized intermediary. Once the swap terms are agreed, smart contracts hold the funds in escrow until both parties have fulfilled their side of the agreement. If one side doesn’t pay up within a certain timeframe or doesn’t pay the full amount, their original owners get their funds back. 

While atomic swaps are useful for crypto-to-crypto exchanges, trading privacy coins and fiat without relying on a CEX requires the use of P2P platforms like Local Monero. 

In a way, these hark back to the early days of crypto and Satoshi Nakamoto’s original vision for Bitcoin (BTC). Nakamoto saw BTC as a P2P payment platform that doesn’t rely on financial institutions. P2P platforms typically let users choose their preferred payment method and negotiate the terms of sale. The platform itself never touches the fiat currency, only acting as an escrow account for the crypto and as a mediator in case of disputes.

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