The Balance Between

Privacy, Transparency and Regulatory Compliance

Given the economic environment we are and where yield-starved banks and savers like previously wary endowments, pension funds, and brokerages finally turn into crypto buyers, crypto prices will rise exponentially.

The traditional financial legacy institutions. Have trillions of dollars at stake and they are some of the most conservative investors and have privacy as a top priority.

But these investor’s investments are expected to provide dramatically lower returns going forward than they have in the past.

The following have forever changed the investment landscape

• Aging population
• Lower interest rates
• Still-felt effects of the Great recession
• Privacy and Transparency

The balance between privacy, transparency and regulatory compliance is increasing, and to understand this we need to look at their definitions.

Privacy is the ability and right for individuals to safeguards and protect their financial information, to keep secure and private and to opt out of any information-sharing.

Transparency is the extent to which investors have ready access to required financial information, about a company, such as access and proper disclosure of financial information and fees.

Regulatory Compliance is the ability to act according to an order, set of rules or request issued by a private or public body with the necessary authority to supervise compliance.

As you can see based on the definitions, reaching a balance between these could be a challenge.

In terms of privacy vs transparency, on one hand the general public needs to know that their personal information is safe and secure; on the other hand institutions and governments operate and make decisions, so access to relevant information should not be withheld unjustifiably.

In order to provide fairness, citizens, in a regulated region, will demand fairness and good sound services from their jurisdictions. A fair system should maintain a reasonable balance between the need to give prospective users the details they require to make an informed decision, and protecting them from invasions of privacy and possibly exploit and financial harm. This is where Zero-Knowledge proofs come in, used to verify information without sharing or revealing the underlying data and where the originator or owner of this data has total control.

Creating a stable monetary financial instrument is one of the seven characteristics sound money should have. And a more important characteristic is its fungibility or uniform. This can only be maintained by a privacy preserving protocol such as a Zero-Knowledge digital asset.

This will give regulators the ability to incorporate Anti-Money Laundering (AML) compliance using Zero-Knowledge proofs and maintain financial instrument stability and fungibility characteristics, and at the same time have a balance between privacy, transparency and regulatory compliance. This is not an easy challenge to solve, but with the proper privacy preserving DeFi protocol, that might become a reality.