Concerns Over Banning Blockchain Privacy Solutions
A prominent report from the Royal United Services Institute (RUSI), recognized as the world’s longest-standing defense and security think tank, has raised concerns regarding the potential negative effects of prohibiting blockchain-based privacy solutions. In their latest publication, titled “Privacy-Enhancing Technologies in the Crypto Industry,” RUSI asserts that such a blanket ban could inadvertently push malicious actors toward using unregulated platforms, making it harder for authorities to monitor and manage illicit activities.
Need for Privacy Tools in Cryptocurrency
The analysis draws attention to the increasing necessity for privacy tools within the cryptocurrency market, citing four primary reasons:
- The urgency for individuals and organizations to avoid cybercriminal attacks;
- Rising anxiety about personal data being mined by AI technologies;
- Privacy concerns specific to crypto enterprises;
- The desire of individuals, particularly those with substantial wealth or status, to evade threats from criminals or oppressive regimes.
Insights from Industry Discussions
This report is informed by discussions held in July 2025, organized by the UK’s Home Office and the National Economic Crime Centre, where industry experts, regulatory officials, and enforcement representatives met to examine blockchain privacy technologies including zero-knowledge proofs and confidential stablecoins. RUSI’s findings reveal a consensus among these roundtable participants that instead of implementing bans on privacy technologies, it is crucial to foster collaboration between technology developers and law enforcement.
“Outright prohibition could hinder authorities’ access to information sources, thereby complicating their ability to investigate and combat crime effectively.”
RUSI Associate Fellow Allison Owen stressed that it is vital for industry stakeholders to incorporate compliance features into privacy tools, stating that many companies are eager to collaborate with government bodies to achieve this integration.
Legitimate Uses of Privacy Technologies
While acknowledging that nefarious individuals may exploit these technologies, Owen argued this should not undermine the essential role that legitimate users play in harnessing privacy tools for constructive purposes. The report underscores the legitimate applications of privacy-enhancing technologies, noting their relevance in light of the growing incidences of theft and extortion in the crypto world, exemplified by the alarming rise in what are termed “$5 wrench attacks,” which resulted in losses amounting to $41 million in 2025.
Moreover, the findings highlight that cryptocurrency firms are increasingly interested in maintaining confidentiality regarding compensation and operational methodologies. It was the general sentiment of roundtable participants that privacy-advanced techniques, particularly zero-knowledge proofs, are poised for increased adoption throughout the business sector by the close of this year.
Call for Cooperation and Trust
Despite this optimistic outlook, Owen cautioned that substantial cooperation between privacy solutions developers and the public sector is essential to cultivate sufficient trust in these technologies. She emphasized that integrating compliance features will be crucial in fostering broader acceptance and use of privacy solutions in the crypto landscape. The insights from the roundtable are seen as a pivotal step in navigating the challenges of balancing user privacy with compliance demands.
