Privacy Will Unlock The Next Era of Institutional-Scale On-Chain Finance

Yuval Rooz, CEO and Co-Founder of Digital Asset, the company behind the Canton Network, a privacy-focused blockchain protocol, discusses the criticality of privacy in the next era of on-chain finance and how to drive institutional adoption at scale. He discusses why institutions require privacy-preserving guardrails and why retrofitting privacy onto existing public blockchains is not a long-term solution for institutional adopters or the industry at large. Rooz also speaks to regulatory momentum and building sustainable networks to meet the needs of the future.

Why Privacy and Why Now?

The earliest breakthroughs in blockchain were built on transparency. The first public ledgers used transparency to catalyze open innovation, enable composability, and lay a new foundation of trust that allowed developers everywhere to build on one another’s advances.

This transparency made sense for early adopters, as crypto-native communities valued openness and the ideology of censorship resistance.

Fast forward to today and institutions have moved beyond wanting PoC projects. Now, they want to enable real integrations focused on delivery. This is no longer a question of ‘’if’’ but ‘’when’’ as institutions need to capitalize on the cost efficiency, asset mobility and settlement speed enabled by blockchain technology.

But, privacy has long been the primary barrier to institutional adoption. If you’ve ever worked in a regulated market, whether in capital markets, payments, treasury, or cash management, you know that control over privacy is a critical business requirement.

Take stablecoins as an example. Over the past year, stablecoins have hit an inflection point. Stablecoins have become more mainstream, especially with the passing of the GENIUS Act, which gave institutions clarity on stablecoin adoption. That said, if we want firms to use stablecoins for treasury operations, payments and settlements, their activities can’t be fully visible in real time.

Transparency enabled the first wave of adoption, but privacy will fuel the next era of institutional-scale on-chain finance.

The Privacy Reckoning

Digital Asset has long advocated for privacy in our industry for over a decade, and it’s notable how sharply the conversation has shifted. Years ago, many crypto-native voices insisted that we didn’t understand crypto when we raised concerns about privacy because transparency was seen as the top priority.

But now as institutionalization and scale are the next frontier, privacy is not optional; it’s a prerequisite.

Imagine you’re a corporate treasurer managing liquidity, but your payment flows are visible to the world. Or, imagine you’re a trader and your collateral positions are being broadcast to the entire world.

Without privacy, significant risk and compliance issues arise. At the same time, many crypto-native players are now realizing the importance of privacy as TradFi and DeFi converge and we enter an AllFi reality.

The problem is that most blockchains were built around transparency, meaning every transaction was visible by default. This binary view forces institutions to make a choice between privacy controls and interoperability, either exposing sensitive data or limiting how assets can interact. Also, forcing this choice between radical transparency and isolated silos often causes participants with privacy needs to move sensitive operations off-chain, undermining the magic of blockchain.

Why Privacy Can’t Be Bolted On

Now that many have come to understand the criticality of privacy, we’re seeing blockchain networks attempt to solve this challenge in order to catch the next wave of modernization.

Many public blockchains are trying to retrofit privacy with bolt-on solutions using zero-knowledge proofs. These create an anonymization layer but not true privacy. Zero-knowledge proofs obscure names and amounts but still leave a visible footprint of each transaction on the network. Everyone can see that something happened, just not the details, and if there’s ever a bug or exploit, the network cannot later prove the real transaction to regulators.

From a network-growth perspective, adding privacy on top of an existing public blockchain is not only technically complex, but networks could also encounter resistance from existing community members.

Charting the Path Forward for Meaningful Institutional Adoption

Blockchain networks, and the crypto industry at large, must understand the fundamentals of what publicly traded and large institutions care about and build on-chain systems aligned to those guardrails.

The network is gaining significant momentum in moving real value on-chain at an enterprise level.

This resembles how the internet works: a massive collection of independently operated applications, each with its own privacy settings and permissioning rules. Pragmatic privacy that is programmable and contextual will enable the next phase of on-chain finance, where real assets move across real markets.

As we work to bring real-world utility on-chain, privacy is one part of the puzzle, and regulatory momentum is another. The GENIUS Act was a notable step forward for the industry and we’re encouraged to see regulators putting greater emphasis on transparency and consumer protection in this space.

Though these regulatory tailwinds are beneficial, it is important to remember building technology and waiting for legislators to come along isn’t sustainable. Businesses that can operate in any regulatory environment are critical and baking in privacy and compliance from the beginning enables growth.

While transparency powered blockchain’s earliest experiments and got it off the ground, privacy is now taking center stage and will be the catalyst for the next era of institutional-scale on-chain finance. To meet the demands of the future, the industry must embrace network architectures that embed privacy by design, enabling participants to transact securely and unlock the efficiencies of real-time, on-chain finance.

About the Author
Article authored by Yuval Rooz, CEO and Co-Founder, Digital Asset