Privacy coins are once again in the spotlight—are they a rebound or a reversal?

Writing: JW, Techub News

Since the beginning of this year, the concept of privacy has suddenly been brought back into the market’s spotlight.

Source: Grayscale

Monero(XMR) surged by 89%. Monero is a representative privacy coin focusing on concealing sender, receiver, and transaction amounts, and such performance is already noteworthy. Meanwhile, DASH also skyrocketed by 144%. These older coins, which emphasize “hiding personal information during settlement,” once again outperformed many mainstream assets.

Source: Binance

If we only look at the percentage increase, this isn’t considered an extreme market rally. But in the context of the overall situation of privacy coins over the past two years, such performance is quite abnormal.

XMR was collectively delisted from Korean exchanges as early as 2021, almost completely cutting off mainstream market access. Among privacy coins, Zcash (ZEC) is in a somewhat awkward position. Its core development team, Electric Coin Company (ECC), all resigned, leading to an epic collapse.

This round of surge is widely believed to be related to the upcoming EU (European Union) virtual asset tax reporting regulation DAC8. According to current information, from January 1, 2026, virtual asset service providers will be required to collect and report users’ tax-related data. This means the connection between on-chain addresses and real identities, asset scales will be further institutionalized. Under this expectation, the investment psychology that views “privacy” as a core feature has resurfaced.

Meanwhile, tightening regulations themselves are amplifying short-term volatility. The Dubai Financial Services Authority (DFSA) recently explicitly banned trading privacy tokens within the Dubai International Financial Centre (DIFC) and restricted the promotion of related derivatives. Market interpretations vary, but in the short term, this move has instead strengthened the scarcity expectation of privacy coins, stimulating some short-term buying sentiment.

Why is blockchain privacy necessary?

One of the core features of blockchain is transparency. Anyone can check on-chain transactions in real-time, including who sent funds, to whom, the amount, and when it was sent.

However, from an institutional perspective, this transparency brings obvious problems. Imagine a scenario where the market can observe how much Nvidia transferred to Samsung Electronics, or when hedge funds deploy capital precisely. This visibility will fundamentally change competitive dynamics.

Individuals can tolerate different levels of information disclosure compared to corporations and financial institutions. The transaction history of companies and the timing of institutional investments are highly sensitive information.

Therefore, expecting institutions to operate on fully exposed blockchain activities is unrealistic. For these participants, a system without privacy is less of a practical infrastructure and more of an abstract ideal with limited real-world application.

The two years when privacy coins “disappeared”

Going back to 2023, most people’s impression of privacy coins centered on a few words: troublesome, sensitive, non-compliant. This is not a problem of a single project but a reflection of the entire privacy coin sector being pushed into an extremely awkward position.

During those two years, the keyword in the crypto industry shifted rapidly from “innovation” to “compliance.” Japan’s Financial Services Agency (FSA) required exchanges to stop trading privacy coins, and the President of the European Central Bank publicly criticized these “hard-to-trace” cryptocurrencies. Regulatory agencies’ real headache was the anonymous nature of privacy coins. While normal transfers can still be traced along on-chain paths, privacy coins can hide transfer amounts, making anti-money laundering frameworks almost impossible to implement.

In this context, regulators’ focus shifted from what blockchain can do to where the funds on-chain come from, where they go, and whether they can be tracked. Privacy coins naturally stood on the opposite side of the wind. They are not without value, but the cost of explanation is too high.

As a result, a wave of delisting with a relatively moderate attitude but very resolute execution emerged. Exchanges did not debate the technology of privacy coins nor deny their existence but chose to cut risks in the most pragmatic way. For platforms, continuing to support privacy coins entails potential regulatory costs far exceeding the benefits from trading volume. Privacy coins being delisted is not a “mistake,” but a “costly” decision.

At this stage, privacy coins almost simultaneously lost three things: mainstream access, liquidity, and narrative space. Without exchange support, they are hard to reach new users; without liquidity, price discovery fails; without narrative, the market naturally loses patience. Privacy coins gradually shifted from being a popular experimental asset to a category that is generally ignored.

But the market often overlooks one point: assets can be marginalized, but demand does not disappear out of thin air. The silence in price and discussion does not mean the end of privacy needs; it only means the channels for expression are temporarily lost.

It’s not that regulation has loosened, but that “privacy” is being reinterpreted

Many people simply interpret the privacy coin rebound at the end of 2025 as “old coins catching up” or “sentiment rotation,” but a closer look reveals that this time is not entirely the same.

What has truly changed is not the policy text but the market’s attitude toward “privacy” itself. In recent years, on-chain transparency was seen as an absolute advantage; open ledgers meant verifiability, auditability, and trustworthiness. But as on-chain behavior gradually links with real identities, asset scales, and social relationships, transparency begins to show its other side.

A single transfer might mean exposing asset size; an on-chain interaction could be recorded, analyzed, and profiled repeatedly over the long term. For ordinary users, this “permanent watching” state does not always bring a sense of security. Privacy is shifting from an extreme demand to a reasonable one.

Against this background, privacy coins are re-entering the discussion. Not because they suddenly become compliant, but because the market is gradually realizing that a completely transparent on-chain world also carries systemic risks. This change in perception gives assets previously dismissed a chance for re-evaluation.

Zcash’s performance in this phase is quite representative. It is not the most aggressive privacy coin, but in the new context, it appears relatively “appropriate.” Its optional privacy design allows it to retain privacy features without completely severing ties with compliance systems. The market’s re-pricing of ZEC is more like a reassessment of this middle route.

In contrast, Monero maintains its consistent stance. It does not cater nor compromise, thus bearing greater compliance pressure, but also occupying an irreplaceable position in the privacy narrative. Whenever the market re-discusses “what does privacy really mean,” XMR is almost always brought up again.

When uncertainty rises, privacy is always re-evoked

Another recurring feature of privacy coins is that they are often re-identified by the market during geopolitical conflicts, sanctions escalations, or increased macro uncertainty. This is not coincidence nor conspiracy theory, but a very intuitive psychological reaction.

When the financial system operates stably and rules are clear, most people do not care about privacy issues. But when uncertainty increases, concerns about asset safety, restricted pathways, and sudden rule changes grow. Under this sentiment, the demand for “not easily traceable, not relying on a single system” is rapidly amplified.

It should be clarified that this does not mean “war funds flowing into privacy coins.” Most participants are not trying to evade laws but want to leave some options for themselves. Privacy coins at such moments are more like a psychological hedge rather than a strictly risk-avoidant asset.

Because of this, the market behavior of privacy coins is often event-driven. They can be rapidly pumped at certain nodes and then return to calm after the sentiment subsides. This volatility is not a flaw but a true reflection of their position: neither mainstream assets nor pure speculative instruments, but a recurring hidden thread.

The existence of this hidden thread itself indicates a key point: privacy needs are unstable, but they always exist. They are not discussed daily but are remembered at critical moments.

Privacy is not the main line, but it is hard to bypass

From a longer-term perspective, the significance of privacy coins may not lie in how many times they can multiply, but in how they repeatedly remind Web3 of a real issue: transparency is not free.

Early Web3 was built on the idea of “public trust.” But as the application layer expanded, complete transparency began to reveal structural problems. Not all actions need to be recorded; not all relationships need to be public. Privacy is no longer just a tool to counter the system but a part of the system’s own buffering.

From this perspective, privacy coins are not contrary to the development direction of Web3 but more like a patch that has been suppressed but can never be completely eliminated. They may be restricted, reconstructed, or repackaged, but it is difficult to deny them entirely.

Of course, real risks still exist. Regulatory attitudes remain cautious, and support from exchanges can change at any time. Privacy coins are unlikely to easily become the main narrative of the market, nor are they suitable for simple mythologization. But dismissing them as outdated relics is also a form of underestimation.

The resurgence of privacy coins at the end of 2025 is more like a calibration than a reversal. The market has not suddenly gained faith in them but has re-recognized a fact: in an increasingly transparent and traceable on-chain world, privacy will not disappear but will keep returning in new forms to the discussion.

Possible future directions for privacy

Industry experts generally believe that completely anonymous paths may no longer be feasible. The next step is likely to be controllable anonymity—like anti-virus measures, where protection is applied when needed, and identification is used when necessary.

Another interesting phenomenon is that in some countries, despite explicit bans, underground trading has become more active. This is similar to the Bitcoin era—more bans, more market. However, ordinary investors are advised not to touch this gray area due to high risks.

In the long run, privacy technology may develop toward enterprise-level solutions. Imagine large companies using improved privacy coins for commercial settlements, protecting trade secrets while meeting audit requirements—that would be a win-win situation.