The cryptocurrency world has always had a strange relationship with privacy. Since its cypherpunk origins in the 1990s, when cryptographers and activists circulated manifestos about using encryption to defeat government surveillance, privacy has been treated as almost sacred. Eric Hughes, one of the founders of the cypherpunk movement, wrote in 1993 that “cypherpunks write code” rather than wait for governments to protect their freedoms. John Gilmore, another early cypherpunk, wanted guarantees “with physics and mathematics, not with laws” that would keep even the NSA at bay. This radical ethos birthed Bitcoin and inspired coins like Monero and Zcash, designed to make transactions genuinely untraceable.
The crypto community’s commitment to privacy has only intensified under regulatory pressure. When U.S. authorities sanctioned Tornado Cash in 2022, Vitalik Buterin publicly defended his use of the mixer for charitable donations, while advocacy groups challenged the move as unconstitutional. Privacy coin usage surged in response — Monero reached all-time transaction highs even as exchanges delisted it. By 2023, over 25 Bitcoin companies united against proposed anti-mixer rules, and leaked 2025 DeFi KYC mandates sparked fierce online backlash.
This resistance proves that people genuinely want financial privacy, but passion alone won’t resolve the impasse. Both sides have valid concerns, yet the debate has calcified into an all-or-nothing standoff. What’s needed isn’t louder arguments for absolute positions, but a genuine middle path.
The regulatory reckoning
A privacy absolutist stance sounds principled in theory. In practice, it’s driving away the very institutions and businesses that could make blockchain technology useful at scale. Due to regulatory pressure and increasing compliance risks, major exchanges have delisted privacy coins in droves. By 2025, 73 exchanges worldwide had dropped them, and the European Union will effectively ban “anonymity-enhanced” cryptocurrencies from regulated services by 2027. Japan and South Korea already prohibit exchanges from listing them.
When asked about Monero, developer Francisco Cabanas told Reuters the currency “doesn’t selectively encourage crime, it encourages commerce.” That’s a fair point. Yet regulators see complete anonymity as a non-starter, and the result is that privacy coins exist largely outside the financial system most people actually use.
This creates a trap where privacy purists resist any compromise, viewing it as betrayal of cryptocurrency’s foundational ideals – meanwhile, governments and compliance officers view unregulated anonymity as an invitation to money laundering. This impasse benefits nobody except perhaps criminals, who represent a tiny fraction of users but generate outsized headlines.
Contrary to popular belief, most criminals still prefer Bitcoin over privacy coins precisely because it’s more liquid and easier to cash out, despite being traceable.
The irony is stark. Cryptocurrency was supposed to democratize finance, yet privacy maximalism has made it harder for ordinary people to access privacy-protecting tools. Monero has been pushed into obscurity on regulated exchanges. Even Zcash, which allows users to choose between transparent and private transactions and has tried engaging constructively with policymakers, faces constant delisting pressure. The technology works brilliantly. The politics don’t.
When anonymity becomes a liability
We need to admit something uncomfortable: radical privacy doesn’t scale, and it doesn’t build the trust required for mass adoption.
Everyone celebrates privacy until their funds vanish into an irreversible, untraceable void. There’s a reason most Zcash users still transact transparently, and it’s not just technical friction. People want recourse. They want the option to prove where money came from, or defend themselves in a dispute. Total anonymity sounds liberating until you need to demonstrate you’re not a criminal.
The solution isn’t abandoning privacy. It’s building compliant privacy into the system from the start. Technologies like zero-knowledge proofs already make this possible. ZK-SNARKs, the cryptographic wizardry behind Zcash’s shielded transactions, let you prove something is true without revealing the underlying data.
Vitalik Buterin proposed “Privacy Pools” where users could demonstrate via zero-knowledge proofs that their funds don’t originate from blacklisted sources, achieving both anonymity and regulatory assurance. As he put it, this could serve as “neutral infrastructure for bringing public blockchains into regulatory compliance.”
Critics will say that government appetites for personal and private data onchain is insatiable, and that disclosure will inevitably creep beyond what is legal, and into unfettered surveillance. But what better way to beat the critics than to embrace a technology that can selectively disclose? “Isn’t this what you asked for?” we can say.
This is pragmatism more than surrender. The alternative is worse: corporations and institutions retreating into permissioned blockchains that contradict everything cryptocurrency was meant to achieve. If public blockchains can’t accommodate basic legal requirements around disclosure and compliance, enterprises will simply build walled gardens where they control everything. We’ll end up with the centralization cypherpunks feared, just wearing different clothes. Three cheers for that, I guess?
A spectrum, not a binary
Critics will say any compromise weakens the whole edifice, that selective disclosure or accountable privacy creates backdoors. But this argument ignores reality. Both Monero and Zcash already have view keys that let users voluntarily reveal transaction histories to auditors or investigators. The difference is those features remain user-controlled rather than automatic. That’s not a bug; it’s a feature that respects individual choice whilst enabling compliance when needed.
Our argument should be that this is what you – the regulators, the politicians – have asked for. Let technology be the fix. Coinbase (and others) have asked regulators for decentralized IDs and zero-knowledge proofs to be valid ID methods. This, in my opinion, is the right path.
The stakes are higher than ideological purity. Privacy coins represent only 11.4% of cryptocurrency transactions globally, and their market share isn’t growing fast enough to matter. Meanwhile, the technology underlying them — ring signatures, stealth addresses, zero-knowledge proofs — could revolutionise how we think about financial privacy everywhere. Ethereum is exploring privacy-preserving layer-2 and layer-3 solutions. Traditional finance is experimenting with confidential transactions. But none of this potential gets realized if the conversation remains stuck in 1993, when cryptographer Phil Zimmermann released PGP encryption as a deliberate provocation against government bans.
In my view, the core of the cypherpunk vision wasn’t about absolute secrecy without nuance. It was about returning power to individuals, letting people “selectively reveal” themselves rather than living under constant surveillance. That’s still worth fighting for. But selective revelation requires flexibility, not dogma. It means recognizing that privacy and transparency aren’t binary opposites but exist on a spectrum, and that finding the right balance is more important than defending theoretical absolutes.
Unless more voices in cryptocurrency embrace this position, privacy will remain either illegal or impractical for most users. That’s not an outcome anyone should want. The technology exists to do better. What’s missing is the will to move beyond purity tests and build systems that actually work in the world as it is.