Key takeaways
-
Privacy tokens, such as Zcash, saw gains, while the overall crypto and Bitcoin market capitalization fell sharply.
-
The rally comes against a tightening political backdrop with pressure from the FATF, new EU anti-money laundering rules and a growing list of private coin delistings.
-
Sanctions cases and lawsuits involving mixers and wallets have raised questions about the line between infrastructure and money transmission, pushing compliance teams toward careful risk mitigation.
-
Analysts are divided between viewing the move as a protest against oversight and a fragile late-cycle spike in a shrinking high-risk segment of the market.
Over the past six weeks, the crypto market has lost more than $1 trillion as traders abandon speculative assets. Total market capitalization fell from a peak of more than $4.3 trillion in early October to just over $3.1 trillion, a decline of about 25 to 28 percent.
Bitcoin is down almost 30% from its all-time high in early October, above $126,000, and is now trading at $90,000.
In this context, one of the strongest pockets of performance is also the most volatile category: privacy tokens. Zcash (ZEC) has rebounded several hundred percent since late summer, with its market capitalization rising from less than $1 billion in August to a high of over $7 billion in early November. It briefly overtook Monero (XMR) as the largest privacy coin by value.
At the same time, Zcash rose to the top of Coinbase’s internal search rankings, surpassing Bitcoin (BTC) and XRP (XRP) in user queries, a sign that retail attention has followed this development.
Analysts say the combination of big gains and growing search interest resembles a classic hot trade. The complicating factor is that this is happening in a part of the market facing increasing regulatory pressure, exchange delistings and sanctions-related scrutiny.
Did you know? Most dirty cryptocurrencies do not pass through privacy coins. Chain Analysis 2025 crime report claims that stablecoins accounted for approximately 63% of all crypto transaction volume linked to illicit activities in 2024, having already overtaken Bitcoin as the preferred crypto of many criminal actors.
Privacy Tokens as Outliers: The Numbers and the Stories
The latest initiative was clearly led by Zcash, followed distantly by Monero.
Key figures analysts highlight:
-
ZEC is up more than 200% in about a month in some major theaters.
-
Since late summer lows, point-to-point movements in the ZEC are reaching high triple-digit percentage gains.
-
Monero also rose, but much less, allowing ZEC to briefly overtake it in market capitalization.
-
Despite the rally, ZEC is still trading well below its all-time high.
The explanations fall into two main camps:
-
One group is focused on structure and technology, including lower issuance as halvings progress and the planned NU6.1 upgrade, which shifts more funding control to token holders.
-
Another point is the narrative and structure of the market, including very optimistic public price projections, concerns about oversight, tight order books, and short selling in a relatively small segment of the market.
Most observers agree that the recovery is occurring just as the regulatory and political tide is turning against anonymity-enhancing assets.
Did you know? Even after the recent rally, the entire privacy coin industry is worth between $30 billion and $35 billion, or about 1% of the total crypto market capitalization, according to CoinGecko category data.
Regulations are moving in the other direction
Globally, privacy tokens fit directly into the anti-money laundering (AML) debate.
Since 2019, the Financial Action Task Force (FATF) has applied all of its anti-money laundering and anti-terrorism financing (CFT) standards to virtual assets and virtual asset service providers (VASPs), including the Travel Rule, which requires originator and beneficiary information to accompany eligible transfers.
A targeted update conducted in 2024 found that around three-quarters of the jurisdictions assessed were still only partially or non-compliant with Recommendation 15, and around 30% had not yet implemented the travel rule into law. The FATF also flagged as a specific concern the growing use of anonymity-enhancing cryptocurrencies by illicit actors.
In Europe, the direction to follow is even clearer. New EU-wide AML rules centered on Regulation 2024/1624 and related legislation will ban anonymous crypto accounts and privacy coins on licensed platforms by 2027, according to legal and policy analyses.
Crypto asset service providers will be required to apply bank-style AML controls, verify the beneficial owners behind wallets that interact with their services, and phase out support for fully anonymous instruments.
This does not mean that holding these assets becomes illegal everywhere. But this means that in much of the regulated financial system, the infrastructure is being redesigned under the assumption that privacy tokens will be restricted or excluded.
Delistings, site shrinkage and liquidity risk
The regulatory environment has already begun to reshape where and how privacy tokens are traded.
Key changes:
-
In 2024, privacy tokens saw nearly 60 delistings from centralized exchanges, the highest figure since 2021.
-
Monero accounted for the largest share of removals, with Dash (DASH) and others also affected by exchanges’ revision of AML policies.
-
Binance has restricted or removed trading in XMR, ZEC and DASH for users in several European jurisdictions, citing local rules and compliance.
-
Kraken announced in late 2024 that it would stop Monero trading and deposits for customers in the European Economic Area (EEA), with a withdrawal deadline at the end of the year and clear reference to European Union regulatory changes, including the Framework for Crypto Asset Markets (MiCA).
These steps can create a classic liquidity dilemma. Thin markets can move abruptly with relatively small capital inflows during recoveries. As exchanges migrate from large, well-capitalized platforms to smaller or less regulated platforms, it may become more difficult for larger holders to exit without changing the price. The same structure that allows for sudden peaks can also increase the risk of air pockets during descent.
Did you know? Some countries banned trading in privacy coins years ago. The Japanese regulator has pushed the stock exchanges to deposit Monero, Dash and Zcash in 2018, while South Korea privacy coins prohibited national stock exchanges from March 2021, forcing local platforms to completely delist them.
Sanctions spillover, court battles and compliance anxiety
Sanctions and enforcement measures have added another layer of uncertainty.
In 2022, the US Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash, alleging that the Ethereum-based mixer laundered billions of dollars, including funds linked to North Korea. In late 2024, a U.S. appeals court ruled that approving immutable smart contracts exceeded Treasury’s authority, and in March 2025, OFAC officially withdrew these designations.
However, the legal risk has not disappeared. Tornado Cash’s developers have faced criminal charges in multiple jurisdictions, and one of the co-founders was convicted of charges related to operating an unlicensed money transfer business.
A separate case involving Samourai Wallet sent a similar signal. In November 2025, its founders were sentenced to multi-year prison terms in the United States after pleading guilty to conspiracy to operate an unlicensed money transfer business, with prosecutors alleging that more than $2 billion in Bitcoin passed through the service.
For compliance teams, the line between infrastructure and money transmitter is difficult to draw. Several AML providers and policy groups now place privacy coins, mixers, and some high-risk decentralized finance (DeFi) tools in the same high-risk range. Under pressure from the FATF and national regulators, many companies are overcompliant by blocking filings related to privacy tools, refusing registrations, and limiting the use of payments.
For users, this creates a secondary risk. Even if a specific coin or protocol is not sanctioned, the surrounding ecosystem may still consider it too risky to touch.
What analysts watch next
Analysts are divided on what this rally actually means:
-
Some see it as an exchange of protest against the channel’s increasing surveillance, data sharing rules and sanctions control.
-
Others see it as a late-cycle speculative spike in a declining niche, driven more by leverage and rhetoric than long-term demand.
Key steps on the political side:
-
EU anti-money laundering rules that restrict or effectively ban privacy tokens on licensed platforms are expected to come into full force around 2027.
-
The FATF will continue to publish implementation reviews, and its latest reports indicate that most jurisdictions are still only partially compliant with the Virtual Asset Standards and the Travel Rule.
On the technical side, upgrades such as Zcash’s NU6.1 funding change and experiments with optional privacy layers on major networks can test whether stronger privacy can coexist with regulators’ traceability requirements.
For now, privacy tokens sit between a long-running debate over financial privacy and an intensifying global anti-money laundering and sanctions regime. Knowledge of legal, liquidity and enforcement risks is essential to understanding how this segment works.
