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The New York State Department of Financial Services just approved the trading of privacy-protecting cryptocurrency.

Gemini will become the first BitLicensed exchange to offer trading in Zcash.

The DFS press release summarizes Zcash in the following way:

The Zcash network supports two kinds of transactions, transparent and shielded. Transparent transactions operate similarly to Bitcoin in that the balance and the amounts of the transaction are publicly visible on the blockchain. Shielded transactions utilize z-addresses and are entirely private. Transactions associated with z-addresses do not appear on the public blockchain. Zcash is the digital cryptography-based asset of the Zcash network, similar to how bitcoin is the digital cryptography-based asset of the Bitcoin network.

Earlier this year, the Japanese Financial Services Agency (FSA) strongly encouraged the Japanese cryptocurrency exchange, Coincheck, to ban trading on privacy protecting coins. They claim that privacy protecting coins such as Zcash and Monero are more likely to be employed in transactions for illicit purposes.

We’ve previously explained why there’s no reason an exchange wouldn’t be able to compliantly deal in privacy protecting cryptocurrencies.

Financial institutions are legally required to comply with anti-money laundering and anti-terrorist financing laws and regulations. Can these institutions use a payment system and currency that leaves no record of individual transactions? Absolutely! That system is called cash and just about every financial institution in the world uses it. Cash transactions are still much more opaque than any cryptocurrency transaction, even a Zcash transaction from a shielded address.

And it is encouraging to see New York’s DFS resist much of the panic around privacy-protecting coins, and recognize the potential value they may bring to users. The forward thinking spirit of the decision is capsulated best by this statement by DFS Superintendent Maria T. Vullo:

“This action continues New York’s longstanding commitment to innovation and leadership in the global marketplace. With smart and thorough regulatory oversight, the development and long-term growth of the industry will remain thriving.”