Today, Zcash are often utilized in either of two ways: transparent or shielded. The shielding of the transacting crypto wallets enables a degree of privacy not found on the public-by-default Bitcoin blockchain, for instance .
It’s ZEC’s shielding capabilities that make regulators nervous, narrowing the scope somewhat for this clever use of technology.
The wrapped version of Zcash on Ethereum “really brings the simplest of both worlds,” said Mason Borda, CEO of Tokensoft.
“Obviously Zcash enables shielded transactions, so now holders of Zcash can have assets during a shielded pool and wrap some of those assets to use on Ethereum, maintaining their privacy,” said Borda. “They would like to use their Zcash, but they don’t want to disclose what proportion they need . They just want that information private.”
Wrapping zcash on the Tokensoft platform to be used on Ethereum also makes the shielded version of the coins more palatable to regulators, Borda believes. That’s because it involves a know-your-customer (KYC) process performed upstream, he said, plus the ZEC holder also has got to meet with Anchorage’s compliance as a professional custodian.
“Wrapping the Zcash and putting it on the Ethereum rails does open up the door for these jurisdictions to support this asset,” Borda said. “So it’s a big deal. It’s going to open up Zcash to every other market out there that is currently concerned about enhanced privacy and shielded transactions.”
But doesn’t loading lots of KYC and compliance around zcash defeat the purpose of privacy coins in the first place?
“The goal with Zcash was never to shield from authorities, regulators or your financial providers,” said Diogo Monica, co-founder and president of Anchorage. “The shielding of Zcash came as a response to the fact that bitcoin is pseudonymous. So who you’re shielding from is the public at large and the internet at large. And so the fact that we’re using ERC-1404 standard allows us to guarantee on-chain that we have the advantages of regulation with the advantages of zcash on-chain anonymity.”
ZEC Switching To Anchorage
Tokensoft developed the ERC-1404 standard for SEC-registered assets on Ethereum, a streamlining system that also involves Anchorage as custodian.
The ERC-1404 is essentially a template smart contract with compliance functions baked in, including the whitelisting of investors so regulators know exactly who most are .
“There are certain things we’re switching off, but other things we’re leaving on,” Borda said of WZEC’s ERC-1404 debut. “The main difference is that the whitelisting is off, therefore the tokens are ERC-20 compatible and freely transferable.”
For its part, Anchorage became a professional custodian within the state of South Dakota back in July 2019, following crypto custodian BitGo, which got the green light from state regulators in 2018.
“This is what Anchorage was built to try to to ,” said Monica. “Anchorage was built to use private keys safely for active participation in blockchains. Our technology permits us to possess better liquidity, and public auditability of each single asset that we've on the platform. And also our platform allows us to only add more wrapped assets within the near future.”
CMS Holdings, the institutional crypto firm founded by Bobby Cho of Cumberland and former Circle trader Dan Matuszewski, praised the new partnership.
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