TLDR: I am afraid the Seraphis upgrade might make it possible for governments to pass legislation demanding all businesses and exchanges to collect wallet view keys from users for any and all transactions involving Monero and maintain records, hence allowing state sponsored blockchain analysis companies the abilty to ‘Trace’ Monero transactions.
Disclaimer: I am new to Monero, I lack any detailed understanding of how code works and the complicated cryptography involved within Monero, and at best I possess surface level knowledge about how transactions are kept confidential on the blockchain.
Some of my examples and scenarios assumes that Monero is recognized and classed by governments as a Foreign Currency and is not outright banned in any way.
One of the best things about Monero(in my humble opinion) and its core strength over its peers, is that it is truly Fungible.
From my understanding one of the ways this strict fungibilty is achieved, is by keeping blockchain transaction between wallets; amounts, and addresses: confidential and obfuscated.
Like cash, it doesn’t carry a record of which parties have handled it before, so any Non-KYC exchange or business that deals with XMR is granted plausible deniability over the source of its coins as there is no way to prove if they ever have been involved in any illegal activity(Ransomware, DNM etc.).
Similarly, a customer is also offered plausible deniability(unless other obvious factors are present)
This protects both the exchange and an honest user as they don’t have to worry about handling and dealing with ‘tainted’ coins. This easily makes it superior to any other coin in which there is a risk of your funds getting tainted because of lack of vigilance.
From what I understand, the limitations of View keys presently that Seraphis hopes to solve, is that they only reliably show incoming transaction, but not outgoing transactions or the correct wallet balance.
This in my opinion is good enough!
I believe Governments have a right to demand and collect Tax as it is necessary to fund public infrastructure, social security and protection for its citizens(Whether they do an adequate job of it or not, is not the scope of this discussion as are your feelings regarding it).
Most Governments take TAX evasion pretty seriously.
Assuming I am an Honest Citizen, any XMR flowing into my wallet, originates from my Honest LEGAL Income(Job, freelancing, KYC CEX etc.) and with the limited view key, I can prove that and pay any relevant tax on it.
But what I do with my XMR after that is nobody’s business(not even the governments), it's my hard-earned Monero, and It's cash, so whether I lose it all on meme coins, or buy groceries; that limited view key protects my daily financial decisions from being public by default.
But unfortunately due to that very exact nature, Monero is a particular thorn on the side of Law Enforcement Agencies worldwide. And presently Europe and the G20 nations are pushing disturbing and far-reaching legislation controlling the flow of any kind of money and agreeing on establishing communication channels to easily share information and prevent financial crime.
From My understanding, the Seraphis upgrade allows the private view key to reliably display incoming and outgoing transactions, as well as current balance of the wallet.
After the upgrade, there would be nothing stopping any government from passing legislation demanding that any and all businesses and CEX’s that operate within its borders or offer their services to its citizens; to collect view keys of personal wallets of its customers for all XMR transactions or more worryingly, declare any transaction involving a wallet that has not disclosed its view key to be illegal and in violation of AML laws.
This would have the ripple affect that anyone with a decent database of these keys(maybe state sponsored) could effectively trace a substantial amount of transactions on the blockchain.
Using obfuscation technology of other cryptocurrencies such as Mixer, RAILGUN or coin-join immediately gets your wallet FLAGGED on public ledger, I envision a similar future where any Monero transaction whose view key isn't accounted for gets scrutinized and blocked.
Privacy darlings (such as a certain VPN company with a mole for its mascot) would be forced to collect view keys due to legislations.
A plague, a menace to financial privacy, whether government mandated or not, I believe it is inevitable, if such a feature is natively introduced into Monero.
This discussion isn't about how we the community will get together and ‘stick it to the man’ refusing to give away view keys, or whether such legislation could or could not be passed and its purported efficacy.
This is about whether the Seraphis ‘improvements’ hands over the presently paranoid governments and corporations, a silver platter containing the ability to regulate and track Monero in any substantial capacity.
I am losing sleep over this, call me paranoid, but such far-reaching regulation is definitely not out of the question, the BTC maximalist would celebrate the news, most people in the crypto space won’t really care or understand its implications, the financial press would run articles about how ‘Monero the problematic child’ was tamed and can now be allowed to relist and used for speculative investments.
I think the project developers should take this into consideration and either severely limit or drop this feature entirely as it has potential for Abuse by the establishment and can threaten the core values behind Monero
How hard is it to implement a backdoor in a fully opensource project? (Assuming the project in question has a lot more eyes on it then an overworked developer)