Regulators have forced exchanges to withdraw XMR from their trades. The WXMR token would satisfy the concerns of regulators and would bring liquidity to the Monero market.
The launch of the WXMR token on Ethereum (ETH) seeks to create transparency in operations involving Monero (XMR) on exchanges. The objective is to create a market with a cryptocurrency that has parity with XMR so that regulators can keep track of these operations. Additionally, traders will be able to trade a token that has the same value as Monero on DeFi markets.
Exchange BTSE recently released that information through its blog, explaining that they will be safeguarding “wrapped” token WXMR.
They also reported that they will use a “proof of reserves” for the process of issuing and distributing the WXMR token. This allows the exchange to create each token in correspondence with the funds that it holds. The reason for this is that each token issued is equivalent to one Monero deposited on the exchange.
The text explains that it is like depositing XMR and using the conversion function to exchange it for the “wrapped” token or vice versa. BTSE said that they will “publish periodic cryptographic reserve tests.”
BTSE launched the token to address the dilemma that arises between the interests of exchanges and those of regulators and government agencies. The latter seek to know the origin of the funds that users move on privacy-focused networks. In the particular case of Monero, this crypto asset allows hiding the sender, the recipient and the funds involved.
Bittrex recently told its customers to withdraw their XMR, ZEC, and DASH funds before January 15th. The ecosystem did not take this willingly, and there was even confusion. Regulatory requirements seem to have led to that decision. These agencies allegedly seek greater transparency in operations by implementing identity control (KYC) and anti-money laundering (AML) measures.
BTSE believes that regulators could monitor transactions recorded on public blockchains such as Ethereum and Bitcoin. They claim that this will happen via the wrapped token WXMR. Discussions about privacy control have given rise to the idea that cryptocurrencies such as Monero, Zcash (ZEC), and even DASH allowed illegal operations. However, existing regulations could limit criminal behavior, even with privacy-focused cryptocurrencies.
Use of Monero on Ethereum DeFi Markets
One argument for creating the WXMR token is to increase its liquidity through the DeFi Ethereum markets. XMR currently exceeds USD 2.9 billion in market capitalization, according to data from CoinMarketCap.
Some Reddit users raised last year that XMR could reach the DeFi markets, such as had already happened with Bitcoin (BTC). “Many people have a hard time accessing a way to get XMR. This is because many exchanges do not include this due to its privacy nature,” commented user MasterTheGame.
Last November, the WBTC tokens locked on Ethereum amounted to US 3 billion, causing this expectation to grow. At the time of writing this article, the trading volume of the WXMR token against ETH is around USD 52,877, according to data from Uniswap.
By Alexander Salazar