- Privacy coins, Monero, Dash, and ZCash are soaring, with each growing more than 20%.
- The tax bodies of the United States and Australia fixing their gaze on crypto gains lie among the reasons for the rise in privacy coins.
- DEX, decentralized exchanges, are partly involved in enabling crypto traders to evade taxes.
- Experts suggest that the popularity of privacy coins will continue to rise in the coming months.
Privacy coins, a class of cryptocurrency that secures user identity by concealing the origin and destination of blockchain transactions, have witnessed a major surge after the Australian government announced a move to target crypto gains.
Privacy Coins Make Gains
Just 24 hours after statements made by the Australian Tax Office (ATO), declaring their intention to look into profits made through the use of cryptocurrencies, the value of privacy coins like Monero increased by over 20%. The ATO also revealed that they are able to track transaction data originating from crypto exchanges in Australia.
In the wake of the statement, Monero, the most popular privacy coin, rose from $220 to $293. Dash and ZCash also soared above 20%, trading as high as $201 and $164.39 respectively.
Amidst general price slumps across the cryptocurrency spectrum, privacy coins are on the upswing resulting from their utility in helping traders evade taxes. As more governments continue to monitor crypto profits and related taxation, more users turn to the acquisition of privacy coins.
Privacy coins make it impossible for third parties to follow transactions on the blockchain, while also obscuring the identity of the traders behind the transactions. To maintain anonymity, privacy coins use stealth addresses, ring signatures, CoinJoin, and zk-SNARKS. Privacy coins can be legal or illegal depending on the country in which they are used.
Over the last three months, Monero has made gains of more than 190%, while a number of other privacy coins like ZCash, Verge, Horizen, and Grin have seen significant boosts as well.
On the Flipside
- Privacy coins are often used to carry out shady transactions on the blockchain due to its untraceability.
- In the beginning of 2021, rising concerns led to the massive delisting of such privacy coins.
- The recent rise in the price of privacy coins may be short-lived as governments may close in on their use as a tax evasion tool.
Are Governments’ Taxations of Crypto Behind the Gains?
Many governments have lost potential revenue from their failure to tax cryptocurrencies, which most of the time is not their fault. The Australian Tax Office released a statement urging the country’s 600,000 crypto traders to pay taxes from profits made with cryptocurrency.
Tim Lo, ATO’s assistant commissioner, stated that “While it appears that cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world through data from banks, financial institutions, and cryptocurrency online exchanges to follow the money back to the taxpayer.”
A similar situation occurred on May 21st when the US Treasury released a statement proclaiming that crypto transactions above $10,000 must be reported to the IRS (the Internal Revenue Service) from 2023. This resulted from the escalating nature of crypto transactions which are expected to further boom in the next decades.
Many traders have now turned to privacy coins such as Monero and ZCash, presumably to avoid taxes, due to their anonymous nature. While other coins can still be traced through centralized exchanges, privacy coins traded with decentralized exchanges can’t be traced back to the user.
If a trader wishes to convert privacy coins into a fiat currency using a centralized exchange, it can still be traced back to them, identification is made possible by the regulation of centralized exchanges. On the other hand, decentralized exchanges made using privacy coins will still protect the trader.