Why Wall Street Won’t Embrace Crypto Without Zero-Knowledge Privacy

When you pay with a stablecoin like USDC, you may be giving up more than just money.

As long as you’re transacting on a public blockchain, a merchant—or anyone, for that matter—can view your wallet, analyze your past transactions, and use or sell your personal financial history.

This feature isn’t a minor inconvenience. It’s why serious institutions, from major banks to government entities, hesitate to adopt blockchain technology.

Financial entities, corporations, and sovereign funds would be worse off if sensitive information, such as treasury operations, trading strategies, and quarterly financial movements, became public knowledge.

What’s needed is a way for these systems to transact confidentially and securely, while demonstrating compliance.

Fortunately, a solution has been emerging for some time.

Zero-knowledge proofs, a breakthrough in cryptography, offer a way to preserve the open, decentralized nature of blockchains while introducing the confidentiality and control that serious institutions require.

Full transparency conflicts with institutional needs

Public blockchains like Bitcoin and Ethereum were designed to prioritize transparency and openness. This works well for censorship resistance and trustless systems that assume everyone involved is better off with everything out in the open.

But for highly regulated organizations or strategically discrete financial entities, this radical transparency becomes a structural weakness.

For instance, most banks operate under confidentiality norms enforced by legal contractual obligations, and payment providers must protect user data under existing frameworks.

As a result, publicly revealing counterparty exposure or transaction timing can create market manipulation risks and breach fiduciary duties.

Similarly, if a government agency used public rails to coordinate emergency aid or military procurement, adversaries could infer national priorities or operational timelines from transaction metadata alone.

In both cases, the consequences of an information breach could be economically or strategically catastrophic.

Even attempts to “mask” activity using pseudonymous wallets or mixers have proven inadequate. Chain surveillance tools routinely de-anonymize addresses by mapping wallet interactions and analyzing on-chain behavior.

In effect, using public blockchains for institutional finance today is like trying to run a business on a public spreadsheet that anyone worldwide can monitor and scrape.

Zero-knowledge proofs solve the privacy problem

Zero-knowledge proofs offer a cryptographic alternative to the binary choice between full transparency and complete opacity.

ZKPs allow one party to mathematically prove a statement is true without revealing the underlying data that makes it true.

For example, a company can prove that its on-chain assets exceed its liabilities without revealing wallet addresses or asset breakdowns.

In practical terms, ZKPs enable selective disclosure, meaning institutions can comply with regulatory obligations, such as AML screening or sanctions checks, while still preserving the confidentiality of their operational data.

Instead of posting raw data to the chain, they post a proof that certain conditions have been met, which is publicly verifiable without ever exposing a transaction or user’s underlying details.

This is an absolute game-changer. For the first time in history, entities can prove who they are, what they have, or what they’ve done without revealing any of this information directly.

Until recently, identity, compliance, solvency, and governance have required disclosure, but with zero-knowledge technology, they require only proof. As a result, institutions no longer have to choose between operational secrecy and on-chain accountability.

Institutions are already building

Institutions that have tried to use public blockchains for serious applications have already discovered these limitations firsthand. As a result, we’re now seeing a proliferation of zk-based solutions tailor-built for real-world, institutional needs.

One of the latest examples is JP Morgan’s Kinexys, a private blockchain designed for tokenized cash settlements and interbank messaging. Kinexys allows participants to tokenize assets and execute transactions with confidentiality guarantees enforced at the protocol level.

Compliance checks, identity attestations, and settlement proofs can be performed without disclosing underlying business data.

The system aligns with the privacy requirements of large financial institutions, which is why it has been integrated into the Partior cross-border settlement network alongside DBS and Standard Chartered.

The fact that one of the world’s most conservative banks felt the need to build its own private blockchain infrastructure speaks volumes—and they are far from alone.

Beyond the explosion in zk-focused businesses and startups, major government entities from the U.S. Department of Defense to the European Commission are exploring ways to leverage ZKP for secure data sharing in high-stakes environments.

Clearly, institutions want the benefits of programmable money and atomic settlement, but not at the expense of leaking proprietary information.

When every transaction is visible to the world, businesses and governments face an impossible trade-off between leveraging next-generation financial infrastructure and protecting sensitive information.

For the technology to underpin payroll, sovereign reserves, cross-border commerce, and institutional settlement networks, it must evolve to meet the standards of privacy and risk control expected in high-stakes finance.

Privacy is not a side quest. It is the cornerstone of scalable, secure, and compliant finance.

If we want the world’s leading financial institutions and public entities to embrace digital assets fully, the blockchain industry must meet them where they are, with cryptographic tools that align with how they operate.

Zero-knowledge technology is how we get there.

Edited by Sebastian Sinclair