CryptoReflexions#20 - Blockchain and Privacy 6 Myths to Debunk

Hello everyone,

Today, a reflection on privacy on blockchains — through six persistent myths that it is time to debunk.

Interested?

Let’s go!

Blockchain and Privacy: 6 Myths to Debunk

The tension between transparency and confidentiality is not inevitable. Cryptographic advances — notably zero-knowledge proofs (ZKPs) — make it possible to protect users’ privacy while meeting compliance requirements. Here are six misconceptions to reconsider.

1. Is Privacy a Problem Unique to Crypto?

Every technological revolution has reshuffled the cards of privacy. The 19th century saw similar concerns arise around the telegraph, photography, and the telephone. The foundational article by Brandeis & Warren, The Right to Privacy (1890), was born from this context. Privacy on blockchain is a societal question — not a crypto-specific problem.

2. Confidentiality Enabled the Rise of the Internet

The lack of confidentiality long hindered the adoption of the web. HTTPS and asymmetric encryption were the catalysts for online commerce. Crypto needs the same foundation: users will not transact on-chain if merchants can access their entire wallet history. Confidentiality is the missing link for mass adoption.

3. Blockchain Transactions Are Pseudonymous, Not Anonymous

All on-chain data — addresses, amounts, timestamps — are public. Pseudonymity offers an illusory protection: as soon as an address is linked to an identity (via KYC or a commercial transaction), the complete history becomes traceable. Hybrid solutions via privacy pools — using ZKPs to prove the legitimacy of funds without revealing the complete history — could constitute a response compatible with MiCA.

4. Privacy Does Not Facilitate Crime

Statistics contradict this misconception: according to TRM Labs and Chainalysis, less than 1% of crypto volumes are linked to illicit activities, compared to 2 to 5% in traditional finance. On-chain transparency has even helped dismantle platforms like Silk Road and AlphaBay. European regulators should recognize that privacy tools facilitate better governance rather than hinder it.

5. AML Compliance and Privacy Are Not Incompatible

ZKPs, multiparty computation, and homomorphic encryption already make it possible to reconcile both objectives. A ZKP can prove that an address does not appear on a sanctions list without revealing the complete identity. These innovations pave the way for programmable compliance — shifting from a logic of disclosure to a logic of proof. The upcoming European AMLA authority could integrate this paradigm.

6. Privacy Goes Beyond the Financial Realm

Privacy is not reserved for mixers or DEXs — it is a foundational infrastructure. Its applications cover digital identity (proving one’s age without exposing one’s passport), healthcare (sharing results without revealing the complete file), gaming (protecting in-game property), AI (training models without exposing data), and decentralized voting. These use cases align with the eIDAS 2.0 vision of European digital identity.

Conclusion

Every technological revolution reinvents the contours of privacy. Blockchain has the cryptographic tools to meet this challenge — provided that regulators and industry players agree to use them together.

To go further: cryptomonnaie.be — The cryptocurrency blog in Belgium | Newsletter CryptoBelgique — Stay informed about news and updates

Florian ERNOTTE Lawyer 👉more infos about what i do