When paying with Stablecoin like USDC, you may give up more than just money.
As long as you trade on the public blockchain, merchants, or anyone, can view their wallets, analyze past transactions, and use or sell personal financial history.
This feature is not a minor inconvenience. That’s why serious institutions, from major banks to government agencies, are hesitant to adopt blockchain technology.
Financial entities, businesses, and sovereign funds will deteriorate if sensitive information such as financial operations, transaction strategies, and quarterly financial movements become public knowledge.
What you need is a way for these systems to trade confidentially and securely while demonstrating compliance.
Luckily, solutions have been appearing for a while.
A breakthrough in encryption, Zero Knowledge Proof provides a way to implement the confidentiality and management required by serious institutions while maintaining the open and distributed nature of blockchains.
Complete transparency is at odds with institutional needs
Public blockchains such as Bitcoin and Ethereum are designed to prioritize transparency and openness. This is suitable for systems that do not have censorship resistance and trust, which assumes that it is better for all involved to be public.
However, for highly regulated organizations or strategically individual financial entities, this fundamental transparency becomes a structural weakness.
For example, most banks operate under confidentiality standards enforced by legal contractual obligations, and payment providers must protect user data under existing frameworks.
As a result, publicly clarifying the exposure or timing of a counterparty’s transactions creates risks of market manipulation and could violate the fiduciary’s obligations.
Similarly, if an agency uses public rail to coordinate emergency or military procurement, the enemy can infer national priorities or operational schedules from transaction metadata alone.
In both cases, the outcome of the information breach can be economically or strategically devastating.
Even attempts to “mask” activities using a pseudonymous wallet or mixer have proven insufficient. Chain Surveillance Tools routinely anonymize addresses by mapping wallet interactions and analyzing behavior over the chain.
In fact, using public blockchain for today’s Institutional Finance is like trying to run your business on a public spreadsheet that anyone in the world can monitor and scrape.
Zero Knowledge Proof Solves Privacy Issues
Zero Knowledge Proof provides an alternative to encryption to binary choices between full transparency and full opacity.
ZKP allows one party to mathematically prove that a statement is true without revealing the underlying data that makes it true.
For example, a company can prove that on-chain assets exceed liabilities without revealing wallet addresses or breakdowns of assets.
In practice, ZKP enables selective disclosure. In other words, agencies comply with regulatory obligations such as AML screening and sanctions checks and maintain the confidentiality of their operational data.
Instead of posting raw data to a chain, post evidence that certain conditions are met. This is published without revealing the underlying details of the transaction or user.
This is an absolute game changer. For the first time in history, entities can prove who they are, what they have, or what they did without directly exposing this information.
Until recently, identity, compliance, solvency, and governance required disclosure, but zero-recognition technology requires only proof. As a result, agencies no longer have to choose operational secrecy and chain accountability.
The agency is already under construction
Institutions that have tried to use public blockchain for serious applications have discovered these restrictions directly. The result is a surge in ZK-based solutions tailored to real-world institutional needs.
One of the latest examples is JP Morgan’s Kinexya private blockchain designed for tokenized cash settlements and interbank messaging. Kinexys allows participants to tokenize assets and execute transactions with confidentiality guarantees implemented at the protocol level.
You can perform compliance checks, proof of identity, and proof of payment without disclosing underlying business data.
The system is integrated into a transnational disassembly network, along with DBS and Standard Chartered, as it matches the privacy requirements of large financial institutions.
The fact that one of the world’s most conservative banks feels the need to build their own private blockchain infrastructure speaks volume.
Beyond the explosion of ZK-focused companies and startups, major government agencies from US Department of Defense In European Commission We are looking for ways to leverage ZKP for secure data sharing in high-stakes environments.
Obviously, the institution wants the benefits of programmable money and the atomic settlements, but it has not sacrificed leaking its own information.
Once all transactions are shown to the world, businesses and governments face an impossible trade-off between leveraging next-generation financial infrastructure to protect sensitive information.
For technology to support payroll, sovereign reserves, cross-border commercial transactions, and institutional settlement networks, it must evolve to meet the privacy and risk management standards expected in high stakes finance.
Privacy is not a side quest. It is the cornerstone of scalable, safe, and compliant finance.
If the world’s leading financial and public institutions want to fully embrace digital assets, the blockchain industry must fill them where they are, using encryption tools that match how they work.
Zero knowledge technology is the way we get there.
Edited by Sebastian Sinclair