The crypto industry is still far from regulated, but governments are starting to catch up.
In the U.S., the Biden administration decided to go after foreign crypto currency investors with a May 2021 decision to require the collection of data on their activities. The change relies on international cooperation for help in reducing tax evasion.
In response, the U.S. Treasury Department added a requirement for cryptocurrency brokers, including exchanges and hosted-wallet providers, to provide data to the IRS on foreign individuals indirectly holding accounts with them.
“They’re really looking to gather as much information on the purchase, sale and movement of digital assets as possible,” Evan Fox, a director at Marcum LLP, told Fortune. Fox added that the rule changes also equate to a kind of validation of crypto currencies as a viable asset class.
This is the regulatory environment that crypto exchanges must learn to face, and Findora is already emerging as an early adopter of this new reality.
Findora blockchain is “a public blockchain with programmable privacy,” according to the company’s website. Findora announced in October 2021 a $100 million ecosystem fund that would be used to accelerate the growth and development of its community.
Through the initiative, developers can apply for grants via the Findora Foundation website to help seed their ideas and accelerate their growth. “The Findora community will be able to vote on which projects get funded through a governance process administered by a DAO,” Findora said in the announcement.
Investors have taken notice of both Findora blockchain and its mission to use cryptography to offer on-the-blockchain confidentiality for stablecoins, NFTs, DeFi projects, and other initiatives.
Just a year ago, in December 2020, Findora ended a funding round that included many well-known investors including Allchaineed, Krypital Group, Axia8 Ventures, Cabin VC and Powerscale Capital. The amount of funding was not disclosed but the company told CoinDesk it was in “the tens of millions.”
Governments will continue to create new laws on financial privacy, so it’s not surprising that many crypto-facing companies are moving forward with privacy initiatives.
“Some would argue that they have gone too far, or are fighting the wrong battles,” Forbes wrote in an article titled, “Crypto Investors Defy Regulatory Uncertainty To Profit On Right To Privacy.”
But the Vice President of Product at Discreet Labs, which developed Findora, believes that now is the time for crypto companies to address privacy concerns. It has already taken far too long to reach this point, Warren Paul Anderson said in a column for CoinTelegraph.
In the column, Anderson argues that the blockchain community has “fallen short” in making privacy a priority because it was too preoccupied with security, decentralization and scalability. Other reasons include the general difficulty of guaranteeing privacy on the blockchain as well as a “myth in the media that crypto transactions are completely anonymous.”
“The last reason is probably the most concerning,” Anderson wrote. “There’s a myth in the media that crypto transactions are completely anonymous. They are not. This means that many people have been actively using crypto under the fallacy that their transactions are private. As blockchain network analysis tools become more sophisticated, the lack of anonymity increases. So, when does privacy become important enough to make it a priority?”
Findora isn’t the only company that has decided that the moment for privacy has arrived. Other examples include:
- Zcash: Launched in October 2016, Zcash uses zero-knowledge proofs to offer a way for nodes in the community to confirm a transaction is legitimate — without giving away details about the transaction.
- Monero: Launched in 2014, Monero depends on stealth addresses and ring signatures to cover everything from the addresses of the sender and recipient to the complete transaction quantity.
- Secret Network: Secret Network aims to be the primary blockchain to combine privateness by default for Ethereum contracts. Secret Network improves on these contracts by supporting encrypted info throughout the contract.
It remains anyone’s guess what the future of privacy for crypto will look like in the U.S. and around the globe. What’s certain is that crypto exchanges and other DeFi companies must continue to work with regulators to figure out how and what privacy will look like on the blockchain.