U.S. SEC Ends Zcash Foundation Probe as Dubai Tightens Rules on Privacy Tokens

The investigation into Zcash Foundation have been halted by the U.S. Securities and Exchange Commission (SEC), and has not taken any additional steps. Importantly, the ruling removes a key regulatory pressure on one of the biggest privacy tokens in the crypto space.

How Does The SEC Probe End Affect Zcash

According to a post from the Zcash Foundation, SEC has ruled out fines, as well as the need to impose corrections. Investigation commenced in August 2023 following a subpoena and this decision was based on the wider investigation on this crypto asset.

The highest U.S. regulator has now completed their examination and resolved to close the issue. In the case of the Zcash ecosystem, it is a relief that comes after over two years of uncertainty.

It is a decision that has followed other issues in the ecosystem, including a dispute in Zcash governance that destabilized investors confidence and saw all core developers step down. The Foundation added that the outcome is an indication of its transparency and adherence to regulations.

The foundation also reiterated its interest in developing privacy-friendly financial infrastructure to be used by the populace. The ruling by SEC minimizes the legal uncertainty in relation to the development of Zcash.

However, it does not imply that privacy tokens will be blanket approved in the United States. Tokens with privacy features will most likely be scrutinized.

Why Dubai Is Banning Privacy Tokens? 

The SEC ruling contrasts actions taken by some other global regulators when treating privacy-oriented crypto assets. For instance, Dubai announced constraints on these tokens in its financial free zone.

The difference in regulations is proof a growing regulatory divide as to the treatment of privacy technology. The Dubai Financial Services Authority prohibited privacy tokens in the Dubai international financial center.

The prohibition extends to the trading, the promotion, funding and derivatives, of these assets that are privacy-focused. The most prevalent factors mentioned were anti-money-laundering risks and anti-sanctions compliance risks.

Use cases mentioned by the DFSA as extremely difficult to monitor their transactions even with the assistance of regulated firms are the ones based on privacy tokens. The regulator stated that the features are inconsistent with the transparency requirements by the Financial Action Task Force (FATF).

Can Privacy Tokens Survive U.S. Regulation? 

The regulations became effective instantly, increasing regulatory supervision over one of the largest financial centers of the region. In addition, this understanding has led to a new perspective in the way other jurisdictions handle privacy coins. Institutional positioning is also changing with Grayscale moving to create a Zcash ETF from the trust version of the token.

These developments are happening as the regulation of the industry becomes clearer. During discussions on privacy tokens becoming more popular in Dubai market, it was Zcash that was mentioned in particular.