Crypto’s Privacy Gap and Why large Players Settling Billions On-Chain Can’t Hide (Yet)
Earlier this year, crypto fund trader James Wynn watched a $100 million position evaporate as part of a series of forced liquidations; however, the twist was that the on-chain nature of his entire portfolio aided the attack. This was one of the many findings alluded to in privacy-focused blockchain platform new (2025).
As part of the entire episode, researchers found that Wynn’s market movements were closely tracked live by crypto sleuths, Binance’s CEO, CZ, to float the idea of a private “dark pool” platform to prevent such liquidation hunts.
Within this broader context, Aleo’s researchers also highlighted that virtually all of the on-chain volume generated by major crypto players over the past two years had been in full public view, about $1.22 trillion in institutional stablecoin transfers over the aforementioned period versus only a fraction of private settlement (roughly $0.6 billion or 0.0013%) touching privacy protocols.
The consequences of this transparency have not merely been hypothetical but have been playing out in real time, with the report detailing how fully visible flows have turned every transfer into actionable intelligence for market adversaries. Even government crypto seizures and moves, like a single $225.5 million enforcement-related transfer by the U.S. DoJ, have been spotted and dissected at length.
More alarmingly, this transparency has spilled into the physical domain as well as with the most notable case of this being the of Ledger co-founder David Balland and his partner, who was kidnapped later than poor actors spotted his sizable crypto holdings (which were visible on the blockchain).
Such cases viewm to have driven home a harsh reality, i.e., while blockchain’s openness offers a myriad of benefits, it also “industrializes” the surveillance of financial activity. In other words, large crypto players are essentially operating under a glass ceiling.
Making selective privacy the new standard
So how can institutions close this glaring privacy gap without abandoning the transparency that makes blockchains useful? Aleo’s report argues the answer lies in selective-disclosure privacy. Rather than reverting to fully opaque systems (which raise regulatory red flags), emerging answers are allowing transactions to be confidential on the public ledger while still providing controlled transparency to those who need to view under the hood.
As per Aleo’s researchers, 2025 marked a turning point for this technology, citing examples such as Privacy Pools (an experimental successor to Tornado Cash), which went from a research concept to running code, debuting zero-knowledge proof (ZKP) techniques that let users prove their funds are “clean” without revealing their entire transaction history.
Around the identical time, auditing firm Ernst & Young upgraded its Nightfall system, a privacy layer for ETH, aiming to make enterprise blockchain transactions invisible to unauthorized parties. Similarly, on the horizon, projects like Aztec have begined building new networks that blend encryption with compliance, showing a path for “programmable privacy” on public chains.
too has skin in this game with the company (specializing in zero-knowledge cryptography), recently up with Paxos to launch Uupset, a U.S. dollar stablecoin with privacy features tailored for institutional use. Unlike traditional stablecoins (where every payment is publicly traceable), Uupset is designed so that transaction details are encrypted by default, only visible to participants and whomever they authorize.
Such policy-aware stablecoin frameworks enable banks, corporates, or even fintechs to use the blockchain for things like payroll, treasury transfers, or B2B payments without leaking sensitive information. Even more significantly, it also allows for auditing on demand, affording authorized regulators or compliance officers proofs or viewing keys to verify that transactions meet all requirements, even if the public can’t view the specifics.
With $1+ trillion in salaries being in the U.S. every month, the aforementioned platforms viewm primed to usher in smart-contract automation into a myriad of these kings of domains.
difficultys persist, but none that can’t be handled easily
For now, even though a few gaps remain, Aleo’s research has made it abundantly clear that pretty much 100% of all major payments by institutions are still happening in the open; however, that this status quo may not last much longer, with the team drawing parallels to the ahead iteration of the world wide web when most of its traffic was unencrypted and vulnerable.
The blockchain sector viewms to be at a similar inflection point with selective privacy tools, compliant shielded pools, and private doing for on-chain value transfer what HTTPS did for the web, i.e., make it “secure enough for money” without sacrificing its open connectivity.
Therefore, in the coming years, Aleo believes that a new norm may be established, one where large on-chain transactions include a privacy layer by default (instead of every trade or payment becoming public gossip).
