Can Cryptocurrencies Preserve Privacy and Comply with Regulations?

Abstract

Cryptocurrencies offer an alternative to traditional methods of electronic value exchange, promising anonymous, cash-like electronic transfers, but in practice they fall short for several key reasons. We consider the false choice between total surveillance, as represented by banking as currently implemented by institutions, and impenetrable lawlessness, as represented by privacy-enhancing cryptocurrencies as currently deployed. We identify a range of alternatives between those two extremes, and we consider two potential compromise approaches that offer both the auditability required for regulators and the anonymity required for users.

Blockchain Analysis Tool For Monitoring Coin Flow

“…Hong et al [21] explores cryptocurrency mixing (laundry) services and proposes a general de-mixing algorithm for common mixing services by exploiting their static and dynamic parameters. Geodell et al [22] present a study on electronic payment methods majorly focusing on cryptocurrencies and comparing their offered anonymity and auditability. They then propose two schemes of using cryptocurrencies which try to provide an acceptable level of anonymity to users and also providing a good degree of auditability to regulatory authorities.…”