Key conclusions

• Privacy tokens such as Zcash have seen gains while the overall market capitalization of cryptocurrencies and Bitcoin has plummeted.

• The rally comes against the backdrop of tightening policy and pressure from the FATF, novel EU anti-money laundering rules and a growing list of coin withdrawals.

• Cases involving sanctions and investigations involving mixers and wallets have raised questions about the line between infrastructure and money transmission, forcing compliance teams to carefully mitigate risk.

• Analysts are divided between viewing the move as a protest against surveillance and a subtle late-cycle rally in a shrinking part of the high-risk market.

Over the past six weeks, the cryptocurrency market has lost more than $1 trillion as investors have withdrawn from speculative assets. Total market capitalization has fallen from a peak of over $4.3 trillion in early October to just over $3.1 trillion, a decline of approximately 25-28%.

Bitcoin has fallen by almost 30% from its highest level in history in early October, above $126,000, and is currently trading around $90,000.

Against this background, one of the strongest performance groups is also the most volatile category: privacy tokens. Since the end of the summer, Zcash (ZEC) has gained several hundred percent, with its market capitalization rising from under $1 billion in August to a peak 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, overtaking Bitcoin (BTC) and XRP (XRP) in user queries, meaning retail attention followed the move.

Analysts say the combination of soaring gains and surging search interest looks like a classic sizzling trade. A complicating factor is that this is happening in a part of the market facing increasing regulatory pressure, exchange delisting and sanctions-related scrutiny.

Did you know? Most grubby cryptocurrencies do not go through privacy coins. Chain analysis 2025 crime report claims that stablecoins accounted for approximately 63% of all cryptocurrency transaction volume related to illicit activity in 2024, having already overtaken Bitcoin as the cryptocurrency of choice for many criminal actors.

Privacy tokens as outliers: The numbers and the narratives

The latest move was clearly led by Zcash, with Monero following from afar.

Key numbers that analysts point to:

• ZEC increased by over 200% in about a month at some major properties.

• Since tardy summer lows, point-to-point movements in ZEC have achieved triple-digit percentage increases.

• Monero’s value also increased, but by much less, allowing ZEC to briefly overtake it in terms of market capitalization.

• Despite the boost, ZEC is still trading well below its historic high.

The explanations can be divided into two broad camps:

1. One group is focusing on structure and technology, including sinking issuance as halvings progress and the planned NU6.1 update moves more control over funding towards token holders.

2. Another points to the market narrative and structure, including very hopeful public price forecasts, concerns about oversight, low order volume and compact orders in a relatively petite segment of the market.

Most observers agree that economic growth is gaining momentum as the tide of regulation and policy turns against assets that boost anonymity.

Did you know? According to CoinGecko category data, even after the recent growth, the entire privacy coin sector is worth approximately $30-35 billion, or approximately 1% of the total cryptocurrency market capitalization.

Regulation goes the other way

At a global level, privacy tokens are at the forefront of the anti-money laundering (AML) debate.

Since 2019, the Financial Action Task Force (FATF) has applied its full anti-money laundering and countering the financing of terrorism (CFT) standards to virtual assets and virtual asset service providers (VASPs), including the travel rule, which requires that eligible transfers be accompanied by information on the originator and beneficiary.

A targeted update in 2024 found that around three quarters of assessed jurisdictions were still only partially or not in compliance with Recommendation 15, and around 30% had not yet implemented the travel rule. The FATF also identified the growing employ of anonymity-enhancing cryptocurrencies by illegal entities as a particular problem.

In Europe, the direction of travel is even clearer. Modern EU-wide anti-money laundering rules focused on regulation 2024/1624 By 2027 and related legislation will ban anonymous crypto accounts and privacy coins on licensed platforms by 2027, according to legal and policy analysis.

Crypto asset service providers will be required to apply bank AML controls, verify the beneficial owners behind wallets who interact with their services, and withdraw support for fully anonymous instruments.

This does not mean that it will become illegal to store these assets anywhere. However, this means that in much of the regulated financial system, infrastructure is being redesigned with the understanding that privacy tokens will be narrow or excluded.

Delistings, tightening markets and liquidity risk

The regulatory backdrop has already begun to change where and how privacy tokens are traded.

Key changes:

• Nearly 60 centralized exchanges delisted privacy tokens in 2024, the highest since 2021.

• Monero was responsible for the largest share of takedowns, with Dash (DASH) and others also impacted as exchanges revisited anti-money laundering rules.

• Binance has restricted or removed XMR, ZEC and DASH trading for users in several European jurisdictions, citing local rules and compliance.

• Kraken announced in tardy 2024 that it will halt Monero trading and deposits for customers in the European Economic Area (EEA), with a year-end end-of-life phaseout deadline and explicit reference to regulatory developments in the European Union, including the Markets in Crypto Assets (MiCA) framework.

These steps can create a classic liquidity dilemma. Tight markets can move wildly with relatively petite inflows during rallies. As trading migrates from immense, well-capitalized platforms to smaller or less regulated platforms, it may become more challenging for larger holders to exit without changing the price. The same design that allows for sudden jumps can also boost the risk of air pockets developing when going downhill.

Did you know? Some countries banned the trade of privacy coins many years ago. The Japanese regulator pushed for exchanges drop Monero, Dash and Zcash in 2018, while South Korea banned privacy coins from national exchanges from March 2021, which will force local platforms to withdraw them completely.

Spread of sanctions, court battles and compliance concerns

Sanctions and enforcement actions added another layer of uncertainty.

In 2022, the United States Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash, alleging that the Ethereum-based mixer laundered billions of dollars, including funds linked to North Korea. In tardy 2024, a US appeals court found that sanctioning immutable sharp contracts exceeded the Treasury’s authority, and in March 2025, OFAC formally withdrew these designations.

However, the legal risks have not disappeared. Tornado Cash’s developers faced criminal prosecutions in several jurisdictions, and one of the co-founders was convicted on charges related to running an unlicensed money transfer business.

A similar signal was given by a separate case involving Samourai Wallet. In November 2025, its founders received long prison sentences in the United States after pleading guilty to conspiring to run an unlicensed money transfer business, with prosecutors alleging that more than $2 billion in Bitcoin flowed through the service.

It’s challenging for compliance teams to draw the line between infrastructure and money transfer. Several AML providers and policy groups currently place high-risk coins, mixers, and some decentralized finance (DeFi) tools in the same higher-risk bracket. Under pressure from the FATF and national regulators, many companies are being unduly compliant, blocking deposits linked to privacy tools, sinking offers and limiting the employ of payments.

This poses additional risks for users. Even if a particular coin or protocol is not sanctioned, the surrounding ecosystem may still treat it as too risky to touch.

What analysts will watch next

Analysts are divided on what this rally actually signals:

• Some see it as a protest against growing onchain surveillance, data sharing rules and sanctions control.

• Others see it as a late-cycle surge in speculation in a shrinking niche, driven more by leverage and narratives than long-term demand.

Key milestones on the policy side:

• EU anti-money laundering rules, which restrict or effectively ban the employ of privacy coins on licensed platforms, will come into full force around 2027.

• The FATF will continue to publish implementation reviews, and the latest reports show that most jurisdictions are still only partially compliant with the virtual asset standards and travel rules.

From a technical perspective, updates like the NU6.1 Zcash funding change and experiments with optional privacy layers on mainstream networks could test whether greater privacy can coexist with regulatory requirements for traceability.

For now, privacy tokens sit between the long-running financial privacy debate and an intensifying global anti-money laundering and sanctions regime. Awareness of legal, liquidity and enforcement risks is imperative to understanding how this segment operates.