Privacy Whitepaper Published 🎉
Announcing the Publication of “Anti-Money Laundering Regulation of Privacy-Enabling Cryptocurrencies” by Perkins Coie, LLP
Tari Labs’ unwavering commitment to privacy forms the ethos of the Tari protocol and guides virtually everything we do. The Tari community is intentionally choosing for Tari to be primarily merge-mined as a sidechain to the most private cryptocurrency in existence today --- Monero --- to underscore its belief that the true promise of a trustless, decentralized system of value exchange cannot be realized unless the information underlying each transaction thereon remains private. Indeed, governments recognize individual privacy as an important right and in various jurisdictions have provided and are enforcing extensive statutory protections to individuals concerning their privacy. Recognition of the fundamental need for transactional privacy is increasingly important as the U.S. and other nations explore the creation of digital reserve currencies many of which, if adopted, could quickly dwarf both the current user base and transaction volume of all existing cryptocurrencies combined. The world is on the cusp of a sea change from traditional fiat currencies to digital fiat currencies and it behooves us all to pay attention to the implications that shift may have on individual privacy.
In order for any cryptocurrency to be viable as a means of exchange, those who wish to transact in it must be able to do so without undue constraints. Transactors must be able to exchange fiat currency for cryptocurrency (and vice versa), safeguard their digital assets using custodial wallets, and transfer such assets to third party recipients. Further, certain privacy-enabling features of privacy tokens require there to be a robust pool of users in order to be effective, such as Monero’s use of ring signatures to protect the privacy of senders of XMR and Grin’s use of the Dandelion Relay and Cut-through technique. However, digital asset exchanges --- which play a critical role in facilitating transactions among large industries --- generally have been reluctant to support privacy tokens based on their concerns that doing so would hinder their ability to comply with existing anti-money laundering (AML) regulations. In many instances, these concerns stem from the lack of a full understanding among institutions and law enforcement alike about what privacy tokens are, how they work, and how AML regulations may apply to them.
Over the past year, Tari Labs has been proud to participate in Perkins Coie LLP’s effort to prepare guidance for the industry on how privacy tokens both satisfy the great need for financial privacy and how those handling privacy tokens can comply with AML regulations when doing so through publishing a whitepaper. We shared their view that the best way to address fears stemming from a lack of information relating to privacy tokens is to educate and inform.
We are pleased to announce today the culmination of this effort in the publication by Perkins Coie of “Anti-Money Laundering Regulation of Privacy-Enabling Cryptocurrencies”, co-authored by Dana Syracuse, Joshua Boehm, and Nick Lundgren. This whitepaper has the potential to become highly influential as the industry reaches a new understanding of what privacy tokens are and how they can transact in them. While the authors support their findings with exhaustive research and detailed analysis, the whitepaper’s core conclusion is deceptively simple: Regulated financial institutions can comply with AML obligations when supporting privacy tokens. Period. While privacy-enabled cryptocurrencies may indicate a higher a level of risk than other cryptocurrencies, they can still be supported within a risk-based AML program through appropriate controls that mitigate associated AML risks, including enhanced customer due diligence, limitations on the types of customers and geographies, and ongoing transaction monitoring and due diligence. AML regulations do not prevent regulated intermediaries from supporting these important digital assets.
We believe the whitepaper to be the most comprehensive and authoritative analysis of privacy tokens and related AML concerns to date and are very proud of our involvement in this great effort. In addition to Tari Labs’ Naveen Jain, Riccardo Spagni, and Louis Willacy, who shared the Tari community’s perspective on this topic, we’d like to thank Jayson Benner, dEBRUYNE, Robby Dermody, Justin Ehrenhofer, John Jefferies, Vik Sharma, and Ryan Taylor, each of whom engaged with us to help frame our thinking.
Our involvement with efforts to educate industry participants about privacy tokens and related compliance considerations is far from over. Later this fall we will be announcing the evolution of our efforts in the launch of a dedicated website we are establishing as an industry hub for privacy token and AML compliance-related materials and resources. Moving forward, we will continue furthering industry awareness of privacy tokens and why they’re an important class of digital assets and the broad adoption thereof. Thank you to those of you who have already donated funds to support our efforts. We urge all of you who believe what we’re doing is useful to consider contributing as well so we may continue to invest meaningful resources towards this cause. Please reach out to Louis Willacy (firstname.lastname@example.org) for more information on our plans and how you can become involved.
Join the Community Discussion
There will be a community discussion to answer any questions you may have about the privacy whitepaper this Thursday, September 17 at 18:00 UTC on Telegram or on IRC Freenode (#Tari)
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