The world of cryptocurrency 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 almost sacrosanct. Eric Hughes, one of the founders of the Cypherpunk movement, wrote in 1993 that “Cypherpunks write the code” instead of waiting for governments to protect their freedoms. John Gilmore, another early Cypherpunk, wanted to guarantee “with physics and math, not laws” to keep even the NSA at bay. This radical ethos birthed bitcoin and inspired coins like Monero and Zcash, which were designed to make transactions truly unreliable.
The crypto community’s commitment to privacy has only intensified under regulatory pressure. When the US authorities punish Tornado Cash in 2022, Vitalik Buterin defended to the public His use of the mixer for charitable donations, while advocacy groups challenged the move as unconstitutional. Privacy coin usage has advanced in response—Monero has reached all-time transaction throughput even as exchanges have removed it. By 2023, more than 25 bitcoin companies united Against the proposed anti-mixer rules, and leaked 2025 defi KYC mandates have sparked fierce online backlash.
This fight proves that people really want financial privacy, but desire alone will not solve boredom. Both sides have valid concerns, but the debate has calcified into an all-or-nothing standoff. What is needed is not stronger arguments for the absolute position, but a true middle path.
The counting regulation
A privacy absolutist stance sounds principal in theory. In practice, this drives away the very institutions and businesses that could make blockchain technology useful. Due to regulatory pressure and increased compliance risks, major exchanges have removed drug privacy coins. By 2025, 73 exchanges worldwide They were taken down.
When asked about Monero, developer Francisco Cabanas told Reuters that the currency “doesn’t necessarily encourage crime, it encourages commerce.” That is a fair point. But regulators see complete anonymity as a non-starter, and the result is that privacy coins exist outside the financial system that people actually use.
This creates a trap where privacy purists resist any compromise, viewing it as a betrayal of cryptocurrency’s core ideals – meanwhile, governments and compliance officials view unregulated anonymity as an invitation to launch money. This impasse benefits no one except perhaps criminals, who represent a tiny fraction of users but generate outsized headlines.
Contrary to popular belief, most criminals still are Bitcoin preferred Over privacy coins precisely because they are more liquid and easier to cash out, despite being traceable.
The irony is stark. Cryptocurrency is supposed to democratize finance, but privacy maximalism has made it harder for ordinary people to access privacy protection tools. Monero has been pushed into being deep in regulated exchanges. Even Zcash, which allows users to choose between transparent and private transactions and has tried to engage with policy makers, faces constant pressure to withdraw. Technology works great. Politics is not.
When anonymity becomes a liability
We have to admit something uncomfortable: radical privacy doesn’t scale, and it doesn’t build the trust necessary for mass adoption.
Everyone celebrates privacy until their funds disappear into an irreversible, unreliable void. There is a reason that most ZCASH users still allow clearly, and it’s not just technical friction. People want a retreat. They want the option to prove where the money came from, or defend themselves in a dispute. Total anonymity is liberating until you have to show you’re not a criminal.
The solution is not to give up privacy. This is the privacy compliance building in the system from the beginning. Technologies like zero-knowledge proofs are already being developed. ZK-Snarks, the cryptographic wizardry behind Zcash’s shielded transactions, let you prove something is true without revealing the underlying data.
Suggested by Vitalik Buterin “Pool Pools” Where users can demonstrate through zero-knowledge proofs that their funds did not originate from blacklisted sources, both anonymity and regulatory certainty are achieved. As he puts it, it could serve as a “neutral infrastructure for bringing public blockchains into regulatory compliance.”
Critics will say that government appetites for personal and private data onchain are insatiable, and that this disclosure is inevitably creeping beyond what is legal, and into unprecedented surveillance. But what better way to defeat critics than to embrace a technology that can be selectively disclosed? “Isn’t this what you asked for?” We can tell.
This is pragmatism more than surrender. The alternative is even worse: corporations and institutions that retreat from permissioned blockchains that oppose everything cryptocurrency is intended to achieve. If public blockchains cannot accommodate basic legal requirements around disclosure and compliance, businesses will simply create walled gardens where they control everything. We’ll end up with centralizations feared by cypherpunks, wearing different clothes. Three cheers for that, I guess?
A spectrum, not a binary
Critics will say any compromise weakens the whole edifice, which selective disclosure or responsible privacy creates behind. But this argument ignores the truth. Both Monero and Zcash already have a view key that lets users voluntarily disclose transaction histories to auditors or investigators. The difference is that these features remain user controlled rather than automated. That’s not a bug; This is a feature that respects individual choice while enabling compliance where necessary.
Our argument is that this should be what you – the regulators, the politicians – have asked for. Let technology be the fix. Coinbase (and others) have asked the regulators For decentralized IDs and zero-knowledge proofs to be valid ID methods. This, I think, is the right path.
The stakes are higher than ideological purity. Coins represent privacy only 11.4% of cryptocurrency transactions worldwide, and their market share is not growing sufficiently. Meanwhile, the technology underlying them—ring signatures, stealth addresses, zero-knowledge proofs—could change how we think about financial privacy everywhere. Ethereum explores privacy-preserving layer-2 and layer-3 solutions. Traditional finance experiments with confidential transactions. But none of this potential was realized if the conversation remained stalled in 1993, when cryptographer Phil Zimmermann released PGP encryption as a deliberate push against government bans.
In my view, the core of Cypherpunk Vision is not about absolute secrecy without nuance. It’s about giving power back to individuals, allowing people to “choose to reveal” themselves rather than living under constant surveillance. It’s still worth the fight. But selective revelation requires flexibility, not dogma. This means recognizing that privacy and transparency are not binary opposites but exist on a spectrum, and finding the right balance is more important than defending theoretical excuses.
Unless more voices in cryptocurrency embrace this position, privacy will remain illegal or impractical for most users. That is not an outcome that 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.
