Crypto exchange Binance said on Monday it will not support a recent privacy upgrade for Litecoin (LTC), citing concerns over anonymous transactions.
Binance said it will not support the MimbleWimble Extension Blocks function, which was recently deployed on the Litecoin blockchain.
The world’s largest crypto exchange said that it will specifically not accept deposits made through the function, as due to its privacy-heavy nature, the exchange will be unable to verify the sender’s address.
Any funds sent through the function to Binance will be lost, the exchange said in an announcement.
Litecoin prices, which were already tracking broader losses in the crypto market, deepened their decline after the announcement. LTC is down over 11% in the past 24 hours at $43.64.
Binance the latest exchange to object to Litecoin’s MimbleWimble
While Binance is so far the largest exchange to drop support for the MimbleWimble update, it is far from the first. Several major South Korean exchanges had withdrawn support for Litecoin after the update.
Upbit, South Korea’s largest exchange, said the move was intended to protect investors. The exchange will terminate all support for LTC by June 20.
The move represents apprehension among centralized crypto exchanges to completely anonymized tokens, or privacy coins. Major privacy coins such as Monero (XMR) and Zcash (ZEC) are banned in several countries due to their anonymous transactions.
Binance faces scrutiny over illegal transactions
Binance’s move to drop Litecoin support comes shortly after the exchange was accused of allowing over $2.3 billion worth of illegal transactions on its platform.
While Binance has denied the allegations, it has raised the question of how much privacy is right in crypto. Litecoin’s addition of confidential transactions has also subjected it to increased scrutiny from several exchanges.
Regulators argue that private transactions are a festering ground for money laundering and illegal transactions. Upcoming legislation in the European Union will even target such transactions.
But a bulk of private transactions in crypto, especially through self-custodial wallets, are almost untraceable without some inside information. This makes regulation incredibly difficult.
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