Washington finally pays attention to the entire spectrum of crypto problems; Earlier this week it was the Bitcoin reserve and soon it is privacy.
On October 17, the United States Securities and Exchange Commission (SEC) will hold a public round table about financial supervision and privacy. This is a rare opportunity to change how privacy is treated in economic regulations.
When people use block chains today, they expose more drastically than they realize. Links a social identity to a wallet and an economic life becomes a public food.
This level of data exposure cannot be overlooked in the upcoming public round table. Zero knowledge destinations (ZKPS) offer a different standard option that leak patches and meets the compliance requirements without revealing personal information.
The Round Table of October of the SEC suggests that the agency is open to discussion about smarter attestations. The SEC is investigating an application that would have Tokenized effects act on a national grant; Proof that market methods can modernize without dumping supervision for real risks.
Although ZKPs were born to maintain privacy, most real-world implementations, including what I have focused on-such as launching Zcash-de Scalability. But the privacy potential is mindboring, and the ability to prove facts without revealing data is the best path to restore confidentiality. This opportunity in October gives everyone the opportunity to stop treating privacy as a synonym for confidentiality and ultimately start designing regulated privacy.
Privacy is not confidentiality
Radical transparency, a term that is seen in web3, reads great in a white paper but turns daily life into an open book into practice. A wallet bound to the real ID of a person is overexposed, making his donations, purchases and economic behavioral patterns public forever.
The problem is a no-brainer. People don’t want their financial life to be made public. Privacy is not about hiding malicious behavior; In the first place, it is about protecting personal data that is shared with the rest of the world.
Compliance is an essential condition for combining blockchain, traditional finances (Tradfi) and security, but unnecessary data is shared. ZKPs overcome this problem and help reformulate the surveillance debate, ensuring supervisors that they do not need unprocessed user data to manage risks.
Let locations prove that their capital is sufficient, the concentration limits are maintained and that their obligations towards users and supervisors are being paid. Chargers and brokers can follow the example, prove inventory and segregation through ZKPS and ensure that customer data remain private.
This admission of ZKPs can improve the regulations processes, ensuring that citizens retain their rights and offer real -time guarantees that are needed to be safe.
Privacy must be kept simple
ZKPs have been around for years and help to keep live environments safer and more private – something that I have seen firsthand, while I helped them integrate them into public blockchain protocols. The problem is that shielded transactions are awkward and few portfolios support them; Hardware portfolios not often not. Even worse, even on and off-roots they can see as a high risk.
For decentralized finances (Defi), privacy breaks down even faster, because smart contracts automatically leak the global state, such as automated market makers (AMMs) such as Uniswap.
Today’s designs were not built to hide that, which means that they sacrifice user data security with every trade. The mystery here is that users cannot be expected to only opt for privacy if it is more complex, slower or incompatible with the rest of the ecosystem.
It is still possible to go further, through semi-private architectures that offer a strong privacy for users without losing transparency or compliance.
Semi-Privacy includes the use of Layer-3 (L3) or Application-specific domains to generate ZKPs, which protects data from the public low-2 (L2). Operators can see user activity, but must offer cryptographic evidence of correctness, solvency and more to the public chain (or regulators).
This makes regulated confidentiality possible, so that users can maintain privacy of the public eye, but not designated verifiers. In the case where operators misbehave, such as Censor or Frontrun, users have cryptographic outputs to other domains. This effectively stimulates good behavior.
Locking in regulated privacy
The round table of the SEC must be more than a discussion about data and supervision. It is a time to discuss the outdated considerations that are still present in a society where privacy must be built in as a standard in a way that works with regulations – not against them.
Regulated privacy that protects users, while regulators give the visibility they actually need (and no more than that) can create trust for consumers and providers. ZKPs do exactly that, teaching the confidants needed with the certainty that rules are followed without endangering the privacy of users.
The SEC should use their round table to discuss the moving policy in coordination with what is already technologically possible, creating clear guidelines for maintaining privacy and recognizing evidence as valid forms of compliance with regulations.
ZKPs have already had a huge positive impact on blockchain structures and daily user lives, so why not move that to the government of regulatory vision and supervision? With the right evidence, considered valid by supervisors, the regulatory privacy becomes a reality.
Should regulators treat ZKPs as essential for creating this future? This round table is the moment they can say yes.
Eli Ben-Sasson is the CEO and co-founder of Starware.