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New crypto rules in Dubai prohibit privacy coins like Dash and Monero

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New crypto rules in Dubai prohibit privacy coins like Dash and Monero
New crypto rules in Dubai prohibit privacy coins like Dash and Monero

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The most populous of the seven emirates of the UAE, Dubai, recently brought a set of rules for crypto that was initially praised for obligating crypto firms to seek licenses from a crypto-specific regulatory body in order to operate within its territory. However, upon further inspection, it was revealed that the rules also prohibit the use of privacy coins in the region.

Privacy coins, like Monero (XMR), Zcash (ZEC), and others, are known for using advanced technologies that allow crypto users to move money anonymously. While all other cryptocurrencies are purely pseudonymous, these ones still allow users to hide their identity when transferring funds, which is now banned in Dubai.

The region prohibits all activities related to privacy coins, including the issuance of such cryptocurrencies.

Crypto regulations have been quite long-awaited in the UAE regions, and for now, Dubai is the first and only one to introduce such detailed rules. The rules primarily target virtual asset companies and issuers.

They also defined anonymity-enhancing cryptos as a,

Type of Virtual Asset which prevents the tracing of transactions or record of ownership through distributed public ledgers and for which the [Virtual Asset Service Provider] has no mitigating technologies or mechanisms to allow traceability or identification of ownership.

Other regulators are eliminating privacy coins as well

The race to regulate the crypto sector and establish a consistent oversight of it has been a struggle for regulators around the world, but many have been making progress in this regard. While they have their differences, one of the things that is the same from one jurisdiction to another is mistrust and intolerance towards privacy coins.

Japan is a good example, as it has also taken steps to prohibit privacy coins, while the EU is considering the same move, as they hinder traceability, thus allowing bad actors to use digital assets for illicit purposes.

Senior policy adviser at blockchain intelligence company TRM Labs, Angela Ang, said that obfuscation of fund flows poses a challenge to detecting illicit activities. As a result, it is not surprising that regulators react strongly against these assets and the mechanisms that they use.

Meanwhile, Dubai is trying everything in its power to become an attractive location for cryptocurrency and blockchain companies. As mentioned, last year it created a crypto-specific regulatory body called the Virtual Assets Regulatory Authority (VARA). It was VARA who came up with the new rules and published them now, in an attempt to make the industry safe for firms and consumers alike, while still ensuring that everything is done legally.

Unfortunately, privacy coins directly hinder these ambitions. Since it is not possible to trace the transactions made using these cryptos — eliminating them altogether is the only alternative.

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