Within the crypto industry, privacy coins have been a source of controversy for a significant amount of time. This is because, unlike traditional cryptocurrencies, privacy coin transactions cannot be tracked and as the name implies, offer complete privacy for both the sender and the receiver. This has drawn some to it in the hopes of enjoying completely private transactions but this has also led to criticism of privacy coins being exploited. In the past, a number of criminals have demanded payment in the form of privacy coins to avoid capture by law enforcement and as such, privacy coin continues to raise concern.
On October 19, 2019, the German Federal Ministry of Finance published their “First Money Laundering and Terrorist Financing National Risk Assessment” for 2018-2019 and in the assessment that was an examination of the future possible risks for money laundering within the country and privacy coins are being looked over as the document cited them as one of these possible threats.
The report highlights the fact that unlike traditional cryptocurrencies, privacy tokens cannot be tracked and while they are relatively not as popular as some of the major tokens, their use is growing and as time goes on, they could be a real contender for bitcoin in the future.
The assessments also delved into the use of cryptocurrencies for financing terrorism and while there is evidence to support significant use of crypto in right-wing extremism Islamic extremism, there is nothing to suggest that it is currently being used for terrorism financing. One of the reasons for this is that these tokens are often quite volatile and this makes them an unstable means of payment. However, stable coins could prove to be a valid means of payment since they are pegged to fiat currencies.
“The use of cash, in contrast to the use of pseudonymous crypto assets, leaves no traceable footprint and is easy to handle, so it can be assumed that, for example, the transfer of funds in the field of terrorism financing alongside hawala and money transfer service providers currently continues mainly via cash couriers,” the assessment says.