Author: Eran Barak, CEO of Shielded Technologies
For over a decade, cryptocurrency in the United States has existed in a legal gray area. Regulators have oscillated between silence and sudden crackdowns, leaving developers, investors, and institutions paralyzed by uncertainty.
In 2025, this situation began to change. The U.S. Securities and Exchange Commission (SEC) withdrew its lawsuit against Binance, citing the need for clearer rules. The Senate passed the GENIUS Act, introducing a federal framework for stablecoins. The likelihood of the CLARITY Act being signed into law is high.
Even the White House has changed its stance, rescinding guidance that discouraged employers from including cryptocurrencies in retirement portfolios. An executive order now allows 401(k) plans to allocate to digital assets—indicating that Washington no longer views them as inherent risks but as a viable asset class in the market. Institutions are taking notice.
Legislators may open the door, but unless the infrastructure develops in parallel, institutions will still hesitate, and blockchain will remain confined to retail-driven speculation.
Today's financial rules were drafted for a different era, making them difficult to adapt in this digital age. Blockchain is designed to foster trust and resist censorship through radical transparency, but this design now conflicts with modern expectations surrounding privacy, selective access, and compliance.
This makes it challenging for most blockchains to comply with governance frameworks that stem from political processes or to address specific legal requirements in industries like finance, healthcare, or enterprise data management.
For example, the European Union's General Data Protection Regulation (GDPR) grants users the right to be forgotten, but once data is published on a blockchain, it cannot be altered.
The U.S. Health Insurance Portability and Accountability Act (HIPAA) requires strict protection of health records, yet no hospital can store patient data in a system visible at every access point. Meanwhile, financial institutions need selective disclosure—sharing data with certain parties but not all.
A market where every transaction is fully transparent is inefficient, as the flow of funds can be tracked in real-time, allowing counterparties to trade based on these signals.
For regulation to be meaningful, the systems it governs must be able to comply. This is where the real gap lies today.
The promise of Web3 is control, privacy, and ownership. However, architectures often turn these ideals into trade-offs: private but incompatible with regulation, or open and transparent but at the cost of compliance and user trust.
This issue transcends transaction data. The metadata surrounding each transaction—who accessed it, when, and under what conditions—can be as revealing as the data itself. Most chains overlook this layer, dangerously exposing developers and institutions while attempting to meet compliance and audit standards.
If we want blockchain to serve beyond early adopters and retail use cases, this needs to change. In traditional markets like Nasdaq and the New York Stock Exchange, about 80% of trades come from institutions, whereas in cryptocurrency, the opposite is true, with retail still dominating.
Unless the infrastructure adapts, new laws can only take cryptocurrency so far. Institutions may welcome this clarity, but they will not invest meaningful capital until the systems they rely on meet the operational, legal, and risk standards of regulated industries.
Blockchain has already demonstrated that programmable assets and global settlement are feasible in practice. The current challenge is to scale them for institutional use. This means building infrastructure that can reconcile blockchain transparency with privacy, selective disclosure, and compliance requirements—making it possible to meet the legal and operational standards of regulated industries.
A decade ago, early cloud platforms faced similar challenges regarding security, auditability, and compliance. It took years of engineering, standard-setting, and iteration for these systems to support some of the world's most risk-sensitive industries. Once that was achieved, adoption followed suit, and blockchain now stands at the same threshold.
Fortunately, new frameworks are emerging. Zero-knowledge proofs, selective disclosure, and novel token economic designs provide developers with building blocks for privacy and compliance without reverting to centralized gatekeepers. These tools are becoming clearer just as regulation begins to take shape.
If both evolve together, blockchain will not just be a tool for speculation or niche use cases.
It can become a trusted platform for the next generation of financial and data infrastructure, driving the global economy.
Author: Eran Barak, CEO of Shielded Technologies.
Related: Economist: Federal Reserve actions will significantly boost Bitcoin (BTC) and altcoins, and the market is not ready.
This article is for general informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Original: “Opinion: New Regulations Expose Privacy and Compliance Gaps in Blockchain”
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