Do you remember that Florida teenager who managed to simultaneously hack the Twitter accounts of Kim Kardashian, Elon Musk, Uber, and Barack Obama in an attempted Bitcoin scam in 2020? Law enforcement officers analyzed the blockchain ledger of “anonymized” Bitcoin transactions and were able to locate the hacker, who ended up behind bars.

To most people, it might seem impossible to track transactions through Bitcoin—but that’s not really the case. The FBI’s recovery of Bitcoins paid during the Colonial Pipeline ransomware attack demonstrates that Bitcoin isn’t as untraceable as you might think. So users—particularly criminals and members of fringe far-right groups—hoping avoiding the regulatory eye have turned to a new kind of cryptocurrency: privacy coins.

To understand their increasing popularity, it is important to highlight how privacy coins operate differently from other types of cryptocurrencies like Bitcoin. Bitcoin uses a public ledger system that means transfers are publicly visible, especially if either the sending or receiving crypto wallet sends funds to an exchange site that requires “Know Your Customer” verification. The whole point of KYC, which is used across the financial industry, is to verify a customer’s identity to prevent illegal activities such as money laundering or funding terror activities. Major crypto exchanges like Coinbase use KYC verification to comply with anti-money laundering regulations, and…

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