Is privacy and compliance really incompatible?

This Layer-1 project founded in 2018 provides an interesting answer — using zero-knowledge proof technology to tailor solutions for regulated financial infrastructure. It can protect transaction privacy through confidential smart contracts while meeting regulations like the EU’s MiCA and MiFID II. It sounds a bit sci-fi, but the technical details are quite practical.

**How to achieve privacy and compliance simultaneously?**

The first trick is homomorphic encryption combined with zero-knowledge proofs — transaction amounts, account balances, and holdings are encrypted end-to-end throughout the process. The key is that mathematical operations and transaction verification can be performed without decrypting. It’s like doing accounting inside a sealed box; others can’t see the numbers but can verify that the calculations are correct.

The second trick is even more impressive — an built-in auditable channel. Regulatory agencies or authorized auditors can access necessary data using dedicated keys or protocol mechanisms to perform anti-money laundering checks and compliance reports. Meanwhile, unrelated private information remains confidential. This avoids the dilemma faced by traditional blockchains of “either fully public or completely private.”

**Already in use in practice**

On the DuskTrade platform, institutions are handling over €300 million worth of tokenized securities, conducting confidential transfers while regulators can still audit for compliance. For example, private equity or bond transactions protect investor privacy, but transaction history remains transparent for tax audits.

There’s also a project called Hedger that bridges traditional finance and on-chain ecosystems, helping banks or funds participate in on-chain activities without exposing trade secrets. This approach is quite attractive for institutional entry.