correct as with many other countries.
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Hmm! I think we need to be careful with this information.
This can turn into FUD and misinformation, binance delisted zcash this year in Europe and we knew that, but they listed it again after review. XMR has privacy by default for example, and I don’t think they will dislist it globally.
IMO If haven’t privacy coins in the market, the crypto goals are dead.
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Hi @Michae2xl !
I haven’t talked to community members about this topic yet, so I’ll be careful not to mislead. I’ll only use Zcash community forum for this discussion. Thank you 
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this is yet another example of why spending so much money on politics is a waste of money. just build privacey based products, make them easy to use.
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Binance really can’t afford it otherwise they won’t have number 1 in many regions, including Russia. Let me explain why.
A while back, I tried to register on Gemini. I went through the whole verification procedure, but I never managed to use their services, because after some time they asked for a very detailed report on how I earn money, how much I have and how much I plan to spend. And it was mandatory information with proof of documents attached. I could have provided all this, I have no problem with it, but I found it extremely impertinent and I was not used to this kind of undressing. Btw, I refused, and a week later my Coinlist account was blocked to find out my identity. And for a month now they’ve been doing this and just writing back that it’s a technical glitch. I don’t know if it’s a coincidence, but it seems to me that it’s not. The AML service must have made some notes on me.
So, we have a confidential way to send to Gemini, but before we do that we need to turn the underpants inside out in more detail. I don’t really understand the benefits of this arrangement. Let it better be transparent addresses on an exchange, but Binance never once interested in my income. As long as I have a choice, any exchange that will be interested in this I say no.
PS
I would like to add that at the moment the cold storage address of Binance contains about 2 million ZEC, not including the hot addresses that the exchange has, where several hundred thousand more are circulating, and this is more than 15% of the total circulating volume. In reality, this is our weakest link in the whole ecosystem and alas, but delisting from Binance is in my opinion reputationally even worse than if ViaBTC had 100% hashrate now. What will happen to Zcash price in this case I can’t even imagine. So we are in a vulnerable position here.
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This is an example of “Enhanced Due Diligence,” which I mentioned in the OP. Basically, the exchange is asking the user to confirm their source of income in order to ensure the funds are not associated with any questionable or illegal activity. The exchange wants to be able to demonstrate to regulators that they’re enforcing compliance with anti-money laundering (AML) regulations.
Something similar happened to me a few years ago, not when I opened the account, but when I was trading a lot of ZEC and transferring funds on and off the exchange. I had to provide Gemini with bank statements, payment stubs, and trading activity to substantiate the source of my funds. I only had to do it once, and I still use Gemini regularly to purchase ZEC and often transfer my holdings from the exchange to a shielded wallet.
It’s definitely inconvenient and intrusive, but in my honest opinion, complying with Enhanced Due Diligence requests is better than Gemini (or other exchanges) delisting Zcash because they don’t want to deal with concerns from regulators.
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What is the cost to meet Binance’s potential request?
What is the potential that Binance shuts down?
Will zcash users shift to other platforms, if Binance delists or (closes)?
Will this create opportunities for smaller zec service providers picking up this business?
Is the objective to concentrate zec services in a few providers control?
Should the objective of the zcash blockchain protocol be to empower small and medium size businesses to accept zec at thousands of locations around the globe?
The current ZCG have a track record of concentrating resources an energy into the hands of a few projects, maybe we need a different course direction based on the idea that you have to out grow government regulations, until the governments need to deal with the thousands of small service providers.
I vote against making protocol updates for Binance !
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At this point, any reason we should not just deprecate the old pools (to save on maintenance and dev costs etc), force everyone through the turnstile, and make it all privacey by default.
A wallet that can access liquidity is probably the future anyways? swap, buy and sell inside the wallet. also ETFs.
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Having thought more about this, and reviewed all of the other ideas and details above.
My strong recommendation is that the Zcash ecosystem (and team(s) who would be involved in providing the technical solution) address Binance’s request directly, and as soon as possible, via implementing what they’ve recommended/ what we’re discussing here as a super-transparent address type a new address type: institutional t-address
Why “Institutional” rather than “Exchange”?
I’d suggest we discuss these super t-addresses in an entity agnostic way, because lets suppose in the future, that a national or local, etc government also requests a similar sort of wallet use case/ support…
if we’re going to work for a Binance solution now, how about we do our best to make it as universal as possible?
Zcash has got to operate within the confines/ risks of reality today. I think that it would be a terrible decision to risk delisting from Binance. As mentioned already, that would cause a massive step backwards in the context of ZEC accessibility globally, it would damage the value of ZEC, it would damage the Zcash brand
(Particularly, considering that part of Zcash’s brand is that we are tech-first cryptographers, privacy maximalists, a rational ecosystem, who are interested in also respecting compliance/ regulatory regimes).
A basic requirements spec for institutional T-addresses would be:
- Available only on request from a vetted institution (exchanges, hedge funds, governments, NGOs, et al)
- The institutional vetting process, and an active account of all institutions to be managed and upkept by ZCG/ ZF/ ECC (?)
- The Institutional T-address inherits all of the features of the standard T-address; with exception that Institutional T-addressess can only receive transactions from other Institutional T-addresses, or standard T-addresses
- Institutional T-address ZEC are not able to migrate directly into Shielded Pools, institutional T-address ZEC can only interact with the Standard or other Institutional T-address types
It would look quite bad to respond to Binance with a middle-finger so to speak!
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Why should it have a vetting process?
but I do agree with this:
Particularly, considering that part of Zcash’s brand is that we are tech-first cryptographers, privacy maximalists, a rational ecosystem, who are interested in also respecting compliance/ regulatory regimes
Zcash isnt Monero - I dont understand why we want to transform it into something that already exists. There is a whole bag of random unknown full privacy coins that already exist.
The whole point of Zcash, to my understanding, has been this rationalist approach to private money. A rationalist understands the game of the regulators, yet also understands when to play offense and when to play defense. I am not so sure we have the resources to play offense right now - we need to defend and survive.
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Your solution is that users that dont want to show history just create new wallets and give that viewing key to binance when requested?
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A vetting process is one of the features that would explicitly distinguish I.T.-addresses from standard T-addresses. It is what lets the Zcash ecosystem be sure that the applicant for an IT-address has just, reasonable, motives
If we’re being realistic about the future of Zcash and institutions wanting to have T-2-T limited features, there is probably never a moment where 1,000s of institutions are applying for an IT-address.
For the near-term, lets suppose Binance Global is the first/ only owner of an institutional transparent address. Then in a few months, Gemini or Coinbase opt to apply and receive one. I hope you see where I’m going with this concept. The institutional transparent address type should be rarely granted because there will presumably be a small cohort of institutions seeking the feature set.
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@aquietinvestor, thank you for raising this here and to you and @Beth for all your work on this behind the scenes.
I’ve been thinking about this quite a bit and have read most of the comments in this thread. I was on the call with Binance and have spent a number of years working with both regulators and compliance teams.
Binance represents the access point to obtain ZEC for many people around the world. It likely represents much more than the trading volume of 15% reported on Coingecko as many others inflate volume through wash trading and/or misreporting. Liquidity and access matter. A delisting from Binance would hurt Zcash users, and hurt our efforts to gain reach.
Unfortunately, MiCA and other regulatory pressures will likely continue to result in actions by regulated exchanges. We’ve seen similar actions in Japan, S. Korea, and the UAE. We’ve likely seen overreach in the US, and banking pressures in Australia, Singapore and the UK. It will continue. It won’t be limited to privacy. Defi and self-custody are also in the crosshairs.
That said, I am opposed to making a protocol change for both philosophical and practical reasons.
Instead, I recommend we document and communicate a solution such as the following:
- automated user notification of required viewing key(s) or return address for any funds originating from a z-address
- funds are not available for trading until that information is received
- multiple e-mail and or UI warnings that non compliance will result in the burning of deposited funds after X days
- notification on their deposit address dialogs that this will occur along with an option to include a return address or viewing key in the dialog
- EDD should also be a listed option along with regulatory justification - this is normal for regulated exchanges
Ideally, someone in the community would work to engage with their compliance team directly to review and address any regulatory misunderstanding. If they announce a global delisting, the community might consider a campaign that includes public statements from and promotions with other exchanges in the same jurisdictions.
In the medium term, we need to double down on DEX options and swaps to ensure the world has access to obtain, transfer and use shielded ZEC.
edit: also, credit to @squirrel for the idea of requesting a return address
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These are also good recommendations, but unfortunately they’re social rather than technical.
If the other 9 of the top 10 crypto exchanges, or 49 of the top 50, come to Zcash with the same conundrum, will we have to respend all of the energy to persuade each of them that it’s their issue not ours?
Considering the gravity of this situation, we are best served with some sort of technical, agnostic solution which can scale.
Perhaps we go with a “super transparent” address type implementation that is available to anyone, and completely skip the institutional/ vetting features that I described above.
Is it supposed to guarantee that the IT address has traceable history?
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The only guarantee is that any transactions in, can trace to a public, originating address. Currently, shielded ZEC senders into Binance are the complication.
This discussion is not to the context of entire transaction histories. It’s merely that Binance requires the ability to know where incoming ZEC are from.
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- Why only approved orgs are allowed to acquire an IT address?
- Why IT addresses are prevented from sending to shielded addresses?
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Hello @aquietinvestor and everyone! I continued yesterday to think how this could be implemented not only for this case on binance, but in general as a standard.
In fact, if you think about it, they want to move the point of responsibility from the exchange side to the user side. There can’t be any complaints to them for the second (or previous) step of the user sending their ZECs to (from) a shielded address. They are saying “just send us funds from transparent addresses and send to a transparent address”. They can’t be held further responsible for the user’s actions. The investigator’s focus is no longer on their side. But on user side it has no authority. Okay, that sounds to me like a good enough position for all of us and it’s a very digestible consensus. Especially when we have unified addresses.
Please correct me, esteemed techies, if I’m wrong. But in my opinion all they have to do is move to unified addresses. We have two scenarios: deposit and withdrawal.
Withdrawal is easy because they can automatically sparse a T-address from UA and send the coins to the user’s transparent address. In this case, the user has no user experience issues because today any proper wallet supports auto-screening.
Our main issue is exactly the deposit. And I understand what you mean when you say “special address for the exchange”. That is, it is some format of a unified address that says to the user on it’s wallet "Wait! All your assets are currently shielded, we are about to withdraw some amount from shield to be sent to this address.
The main question is how to implement this scheme without compromising the user experience.
Another option for implementing transparency on an exchange side remains a view key.
PS I read @joshs post later and fully share his opinion.
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ua don’t support this usage scenario at this time. Out of curiosity, how long do you @noamchom @artkor think your protocol changes would take to implement and deploy to production wallets?
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Can’t we embed a special signal (character set) in UA that will signal to a shielding-enabled wallets that this address can only be funded from a transparent balance? This doesn’t require a protocol change, it’s parsing an address in the same algorithm. We have 5 months to solve it. I don’t know, I just suggest.
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