Opinion by: Daniel Taylor, head of politics in Zumo
Peers within the regulatory consultation meeting of average cryptography, and you will quickly notice a distinctive model: a host of tradfi lawyers and a former staff of financial services responding to the documents written by the regulators of financial services, establishing the law of the way in which cryptographic asset activities will be carried out in the future.
He talks about the almost parallel worlds that we have seen in crypto. On the one hand, there are integrators, assimilators and “traditional adopters”. On the other hand, the technological point is almost entirely removed.
Cryptographic technologists might think that it has nothing to do with them – that regulations and compliance are not areas that deserve part of their attention.
Taking this position is a direct threat to today’s cryptography users.
Crypto-tradfi disconnection
In May 2025, Coinbase underwent a data violation exhibiting personal data from customers collected by regulatory obligation during the knowledge process of your customer (KYC). It put aside between $ 180 million and $ 400 million to reimburse fraud customers during subsequent social engineering attacks.
The crypto world responded to Signal which will be obvious for many in the cryptography sector: that there are technological solutions to make such a collection of redundant mass data.
This is achievable thanks to the widespread use of decentralized digital identities and zero knowledge cryptography to prove complaints without exposing sensitive data. If companies do not have customer data, they cannot compromise it.
The urgent need for technologies improving confidentiality
It is not a question of minor discomfort – relevant only for centralized exchanges and neocrypto intermediaries which dominate the landscape of today’s crypto users.
Whether we like this or not, the exchanges remain basic ramps on and outside the rest of the cryptographic ecosystem (non -guardian). KYC is not the only heavy requirement of the data to which cryptography exchanges are exposed.
Other requirements in the United Kingdom, both current (travel rule) and future (cryptoet reporting framework), indicate a future where user transaction data and real world identities and addresses are carefully labeled and packed under the historically incompetent, if not squarely operators, of the guardianship of companies and public authorities.
Crypto users are in danger
With the boom in physical “key attacks” against holders of known cryptography assets in France and elsewhere, this should sound all our alarms and inspire us with a feeling of collective emergency.
Recent: Theft of violent crypto increasing: six attacks that targeted investors
Not building in technologies improving confidentiality within cryptographic intermediaries and in applications as a whole is a cryptographic disaster (not to mention society). And not wondering how cryptocurrency technologies could be applied to achieve equivalent results is increasingly inexcusable.
The modification of the image requires representing this opinion in the regulatory conversations which count and to provide technological solutions which make the obvious need. Cryptographic consumers deserve digital solutions that offer more individual security and more individual confidentiality by default.
How cryptography technologists lead
The good news is that the cryptography industry has history in the introduction of techno-regulatory innovations. Reserve proof systems have become a common way to make complaints on platforms and support assets. The concepts of confidentiality pool explore the maintenance of the confidentiality of Onchain while adhering to the expectations of compliance. And emerging solutions to provide critical legal functions entirely towards. We need more technological defenders and techniques that can marry technological innovation with the needs of the regulatory environment.
What if we don’t do it? We must not hold illusions which, on the current trajectory, the current finalized regulations are based almost entirely on inherited systems and regulations and certainly do not take into account these factors.
If the sector wants the future to be different, we must make sure that political conversation does not only take place in a piece of holders, lawyers and tradfi prosecutions, but rather takes wider perspectives.
Merger of the old world and the new
Cryptographic regulatory frameworks are likely to be legislated by those who have the world of the old world as their reference scope by default and without imagination to see beyond. We have to act quickly to represent more technological and crypto-native views in regulatory engagement. Otherwise, we may find ourselves in the grip with rules that fail to innovate and adapt the unique properties and the potential of the assets of cryptography.
This means more heads buried in the sand on regulatory realities and stand up to shape the regulatory future. This means that more technologists must join regulatory conversation to defend technologies improving privacy and crypto-native solutions.
Opinion of: Daniel Taylor, head of politics in Zumo.
This article is for general information purposes and is not intended to be and must not be considered as legal or investment advice. The points of view, the thoughts and opinions expressed here are the only of the author and do not reflect or do not necessarily represent the opinions and opinions of Cointellegraph.
