A UK defense and security think tank is warning that a blanket ban on blockchain privacy tools would backfire — and could make law enforcement’s job harder.
In a new paper titled “Privacy-Enhancing Technologies in the Crypto Industry,” London-based Royal United Services Institute (RUSI) argues policymakers should avoid sweeping prohibitions on privacy tech and instead pursue collaboration between regulators, law enforcement and developers. The RUSI report — drawing on a July 2025 roundtable convened by the UK Home Office and the National Economic Crime Centre (NECC) — says outlawing privacy solutions would simply push illicit activity onto unregulated services and shrink the number of parties that investigators can engage with.
Why privacy tools are growing
RUSI highlights four legitimate drivers behind rising demand for crypto privacy solutions:
- Protection against hacks and targeted theft.
- Concerns about corporate or AI-driven data mining.
- Businesses in crypto seeking confidentiality for salaries, treasury flows and competitive practices.
- Safety for high-net-worth or prominent individuals facing criminal or authoritarian threats.
Privacy tech on the radar
The report surveys a range of blockchain privacy technologies gaining traction, including zero-knowledge proofs (ZKPs), confidential stablecoins and privacy pools. Roundtable participants — a mix of industry players, regulators and enforcement agencies — stressed that while criminals will naturally be attracted to privacy tools, that risk doesn’t justify banning the technologies outright.
“Banning the technology would result in illicit actors using unregulated services,” the paper notes, adding that such a move would leave law enforcement “with fewer entities to reach out to and request information from,” thereby limiting investigative options.
Collaboration over prohibition
Instead of prohibition, the consensus at the roundtable favored expanded collaboration. Participants urged integrating compliance features into privacy-enhancing technologies (PETs), and exploring how PETs can actually aid detection and investigations when responsibly designed.
RUSI Associate Fellow Allison Owen told Decrypt that firms developing PETs are generally willing to engage with the public sector. “From the roundtable, it is clear that the participating companies that integrate PETs and compliance features are willing to engage with the public sector,” she said, stressing that legitimate uses of privacy tech — from preventing “$5 wrench” physical extortion attacks (which cost the crypto ecosystem a record $41 million in 2025) to protecting employee pay and corporate secrets — should not be overlooked.
Outlook and next steps
The report’s contributors expect privacy-enhancing mechanisms to continue growing, with zero-knowledge proofs particularly likely to be embedded in business processes by the end of the year. However, Owen cautioned that “extensive” collaboration is still needed before public trust in crypto privacy tools reaches critical mass. “Building trust through the integration of compliance features will ultimately expand the use of the technology,” she said.
Bottom line: RUSI recommends a middle path — not a ban — focused on regulatory engagement, developer cooperation, and designing PETs with built-in compliance options so legitimate users can benefit while giving law enforcement workable channels to detect and disrupt illicit uses.
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