The funding comes after a recent Ethereum integration and $6 million in transactions.
0xbow, a privacy-focused decentralized finance (DeFi) platform, announced Tuesday that it has closed a $3.5 million funding round to expand Privacy Pools, its compliant crypto privacy technology.
Privacy Pools leverage smart contracts to aggregate and commingle user transactions, thereby hiding on-chain links while allowing users to demonstrate compliance with anti-money laundering and other legal frameworks. Its Association Set Provider (ASP) system monitors deposits for suspicious activity without holding user funds.
The funding comes shortly after the Ethereum Foundation (EF) added Privacy Pools to its Kohaku wallet. Since its launch on Ethereum in March 2025, the protocol has processed $6 million in transactions from more than 1,500 users, making 1,186 withdrawals, the company said in a press release seen by The Defiant.
The seed round was led by Starbloom Capital and included Coinbase Ventures, BOOST VC, Status Research & Development GmbH and several angel investors. 0xbow had already launched a pre-seed round in 2024, backed by Ethereum co-founder Vitalik Buterin.
The round highlights growing institutional interest in compliant privacy solutions after years of regulatory uncertainty around crypto mixing services. Earlier this year, for example, the federal trial of Roman Storm, software developer and co-creator of crypto privacy tool Tornado Cash, made international headlines as a New York jury deliberated over the legality of such tools.
Ultimately, Storm was convicted of one criminal charge: conspiracy to operate an unlicensed money transmitting business. However, many crypto experts were divided on the verdict, with some saying it was a threat to DeFi, and others saying developers should be held accountable when such tools facilitate crime.
“We’re solving a problem that the industry hasn’t yet figured out: how to give people financial privacy without creating a safe haven for illicit activity,” said Nathaniel Fried, CEO of 0xbow. “You shouldn’t have to choose between privacy and compliance.”
The funding will help 0xbow add more features, expand to other blockchains, and hire engineers. Privacy Pools currently supports ETH, Wrapped Bitcoin (wBTC), and major stablecoins like USDC, USDT, and DAI. The protocol is live on Ethereum.
