Future of Privacy Coins Amid Regulation: Can Monero and Zcash Survive?

Privacy coins are under siege

Five years ago, if you wanted to send cryptocurrency without anyone tracking where it came from or where it went, Monero or Zcash were your best options. Today, those same coins are being pushed out of exchanges, banned in major economies, and labeled as tools for criminals-even though they make up less than half a percent of all crypto transactions. The truth is, privacy coins aren’t dying because they’re broken. They’re dying because the world decided anonymity in finance is no longer acceptable.

What exactly are privacy coins?

Privacy coins are designed to hide transaction details: who sent money, who received it, and how much was transferred. Unlike Bitcoin, where every transaction is visible on a public ledger, privacy coins use advanced cryptography to scramble that information. Monero, launched in 2014, does this by default. Every single transaction uses ring signatures to mix your coins with others, stealth addresses to create one-time receiving addresses, and confidential transactions to hide the amount. There’s no option to turn it off. It’s all or nothing.

Zcash, launched in 2016, takes a different path. It offers optional privacy through something called zk-SNARKs. You can send a regular transparent transaction like Bitcoin, or you can use a shielded transaction that hides everything. The problem? Less than 5% of users actually use the shielded feature, according to 2025 data from Altrady. That means most Zcash transactions are just as visible as Bitcoin’s-and yet regulators still treat Zcash like a threat.

Why are governments cracking down?

The answer isn’t about technology. It’s about control. In 2025, 97 countries have updated their rules to target privacy coins, mostly following guidelines from the Financial Action Task Force (FATF). The FATF wants every crypto transaction over $1,000 to include sender and receiver details-the so-called “Travel Rule.” Privacy coins can’t comply. Not without breaking their core promise.

Regulators point to crime. The U.S. Treasury’s FinCEN reported in 2024 that privacy coins were involved in 38% of crypto-related enforcement actions, even though they only accounted for 0.34% of total transaction volume. That’s a massive mismatch. Chainalysis confirmed it: most illicit activity still happens on Bitcoin and Ethereum. But those are easy to trace. Privacy coins are harder to follow-and that’s what scares authorities.

It’s not just about crime. It’s about surveillance. Governments don’t want citizens to have financial privacy. They want to know where every dollar goes. And if you’re using a privacy coin to avoid tax reporting, avoid censorship, or protect yourself from authoritarian regimes, that’s seen as a threat-not a right.

What’s happening to Monero and Zcash?

Monero’s market cap dropped 37% from early 2023 to early 2025, falling to $2.1 billion. Zcash lost 29%, landing at $1.3 billion. That’s not because demand vanished. It’s because exchanges are dropping them. Kraken removed Monero in 2023. Bittrex followed. By mid-2025, only a handful of exchanges still list Monero in major markets like the U.S. and EU.

Zcash is hanging on-barely. It’s still listed on some regulated platforms because it offers optional transparency. JP Morgan’s Onyx blockchain started using Zcash Enterprise in 2024 for confidential institutional settlements. That’s huge. It means a major bank sees value in privacy… as long as they can turn it off when regulators ask.

But Zcash’s flexibility has a cost. Its shielded transactions use 40% more computing power than Monero’s. That means slower confirmations-22 minutes on average in Q1 2025, up from 10 minutes in 2023. And the blockchain? At 65 GB, it’s smaller than Monero’s 175 GB, but still too heavy for most mobile users.

Who’s still using privacy coins?

Not the average investor. A 2025 Monero user survey found 58% hold computer science degrees. Many are developers, journalists, or activists. In Ukraine, NGOs used Monero to send aid during the 2024 conflict. Donors didn’t want their names exposed to Russian-linked trackers. In Hong Kong, protesters used Monero during the 2024 crackdowns. Traditional crypto would have revealed their identities.

There’s also a quiet enterprise use case. Swiss pharmaceutical companies are testing Zcash for confidential supply chain payments. A manufacturer doesn’t want competitors knowing how much they’re paying for raw materials. But they can’t use Monero-it’s too opaque for auditors.

Meanwhile, the darknet still relies heavily on Monero. Bernstein analysts estimate 65% of current Monero usage is for illicit activity. That’s not because Monero is evil. It’s because it’s the only tool that works.

The regulatory trap

Here’s the catch: if privacy coins want to survive on exchanges, they need to give up privacy. Zcash tried with viewing keys-tools that let authorities see transaction details if they have legal permission. But almost no one uses them. Why? Because users don’t trust the system. Once you give authorities a backdoor, even a small one, it becomes a target for abuse.

Monero refuses to compromise. That’s why it’s still the gold standard for privacy. But it’s also why it’s being pushed into the shadows. In the EU, the Anti-Money Laundering Regulation (AMLR) will ban anonymous crypto wallets starting July 2027. That means Monero will be illegal to hold on any exchange based in Europe. The same goes for Japan, South Korea, Australia, and Dubai.

Switzerland is the only country trying to find a middle ground. In January 2025, it launched the “Privacy Coin Sandbox”-a legal testing zone where projects like Monero and Zcash can experiment with compliance tools without breaking the law. One idea? “Regulatory Node Clusters”-optional nodes that share metadata with authorities without revealing the full transaction. It’s untested. And it’s controversial. Critics say it centralizes control. Supporters say it’s the only way forward.

Can privacy coins adapt?

There are two paths ahead. One leads to extinction. The other leads to transformation.

The first path: Monero and similar coins retreat entirely to decentralized exchanges (DEXs), atomic swaps, and peer-to-peer networks. They’ll survive-but only for users who are technically skilled and willing to pay higher fees. Transaction costs on platforms like Haveno or AtomicDEX are 2.5-4.1% higher than on centralized exchanges. New users take over 11 hours to complete their first private transaction, compared to 2 hours for Bitcoin. That’s not sustainable for mass adoption.

The second path: privacy coins evolve into “regulated privacy.” Dr. Elaine Wu from MIT’s Digital Currency Initiative argues that zero-knowledge proofs-like those used in Zcash-can verify a transaction is legitimate without revealing details. Imagine a system where the blockchain confirms: “This payment is not from a blacklisted wallet,” without saying who sent it or how much was sent. That’s the future some regulators are quietly exploring.

Switzerland’s FINMA has already tested this model with Monero developers. The results? It works. But scaling it requires cooperation from developers, exchanges, and governments. So far, only 18% of privacy-focused platforms have even tried RegTech tools like automated risk scoring for wallet addresses. Compare that to 89% of non-private exchanges. The gap is widening.

What should you do if you own privacy coins?

If you’re holding Monero or Zcash in 2025, you’re in a tough spot. You have three choices:

1. Keep them in a non-custodial wallet. This is the only way to preserve true privacy. Use Monero’s GUI Wallet or ZecWallet. But be warned: you’ll lose access to fiat gateways. No more buying coffee with crypto on Coinbase.
2. Move to a hybrid solution. Use Zcash’s shielded transactions sparingly, and keep most funds in transparent wallets for exchange compatibility. It’s a compromise-but it keeps you in the system.
3. Sell and move on. If you’re not a technologist or activist, ask yourself: do you really need full anonymity? For most people, Bitcoin or Ethereum with a good VPN and a non-KYC wallet is enough.

One thing’s clear: the era of privacy coins as mainstream assets is over. They’re becoming niche tools for niche users. That doesn’t make them worthless. It just makes them dangerous to hold if you’re not prepared for the fallout.

The bigger question

Is financial privacy a human right-or a loophole for criminals? The answer depends on where you live. In the U.S. and EU, regulators say it’s the latter. In places like Switzerland, Singapore, and parts of Latin America, people still believe it’s the former.

Privacy coins didn’t fail because they were bad technology. They failed because the world chose control over freedom. The future won’t be about which coin is more private. It’ll be about which societies still believe you have the right to keep your money quiet.