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ZKsync Blog > Privacy and Compliance Are Not...
Published Feb 23, 2026
Privacy and Compliance Are Not Opposites. The Law Should Catch Up.
What if the choice between financial privacy and regulatory compliance was a false one? Modern cryptography has made it obsolete and Congress should catch up.
The Senate Banking Committee’s work on the CLARITY Act is grounded in a clear and important objective: deliver rules that protect consumers, strengthen national security, and ensure that the future of finance is built in the United States so that this innovation can flourish here for decades to come. That goal is exactly right. The question before Congress is not whether financial activity should move onchain, but whether it will do so in a way that preserves the core values of the American financial system: due process, privacy, and lawful oversight.
For decades, U.S. financial regulation has treated privacy and compliance as a trade-off. You either collect everything, store everything, and monitor everything or you risk blind spots. That assumption no longer reflects technological reality.
Advances in cryptography now allow us to enforce financial rules without requiring the continuous collection and exposure of sensitive personal data. As Congress works to finalize the Clarity Act, this matters now more than ever.
ZK technology enables us to modernize compliance from a model based on bulk data collection to one based on cryptographic verification. Instead of repeatedly transmitting and storing personal identifiable information, participants can provide mathematical proof that required obligations have been met. These include Know Your Customer (KYC) and Know Your Business (KYB) checks, sanctions screening, transaction monitoring thresholds, and other risk controls. For example, a bank could verify that a counterparty has passed sanctions screening by receiving a cryptographic attestation without ever storing that counterparty's passport number or address.
This is not theoretical. It is already technically possible. And it would be a mistake for the U.S. not to incorporate these capabilities into its compliance framework.
We’ve updated laws before when technology made old processes obsolete.
- We moved tax filing from paper mail to electronic submission.
- We legalized electronic signatures under the E-Sign Act instead of requiring wet ink.
- We modernized identity verification to support online applications rather than in-person paperwork.
This approach benefits all stakeholders. Individuals gain stronger privacy protections because their personal data is not unnecessarily distributed. Enterprises gain the confidentiality required to operate competitive and secure markets. Regulators gain higher quality and more reliable compliance signals that are tamper resistant and can be audited when necessary under established legal processes. This improves both consumer protection and national security while reducing the risk and cost associated with maintaining vast repositories of sensitive financial data.
Regulators have already begun to recognize this opportunity. SEC Chairman Paul Atkins has publicly acknowledged the importance of protecting financial privacy while strengthening market integrity, noting that technologies such as zero-knowledge proofs can "allow users to prove compliance without handing over their entire financial history or personal details to intermediaries or to the government.” This posture reflects a pragmatic understanding that modern financial infrastructure must be both technologically sophisticated and aligned with constitutional and economic principles. In this context, private onchain infrastructure should not be viewed as incompatible with oversight. Systems designed with selective disclosure and cryptographic auditability can allow institutions to operate confidentially while still providing regulators with the transparency they need to carry out their mandates.
At Matter Labs, we have built ZK infrastructure, including Prividiums, with these principles in mind. Our goal is to enable Institutions to operate on private onchain systems that support access controls, compliance workflows, and regulatory reporting through cryptographic proof rather than broad data exposure.
We believe the United States has an opportunity to lead by defining a model of onchain finance that is both innovative and responsible. Not by clinging to outdated assumptions, but by updating its laws to reflect what technology now makes possible. Failing to do so won’t preserve safety. It will export innovation, weaken privacy, and leave compliance stuck in the past.
We stand ready to work with Congress, regulators, and the broader public to demonstrate how ZK based rules can strengthen compliance, protect civil liberties, and ensure that the future of financial markets is built on American values and American technology.
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