The Privacy Prerequisite: Why Confidentiality is the Key to Institutional Crypto Adoption

In the transition from a speculative market to a global financial pillar, privacy has moved from a niche preference to a non-negotiable requirement for institutional scale. Mixin CMO Sonny Liu argues that transparency, once an asset, has become a liability.

A Defensive Hedge Against Surveillance

As the digital asset landscape undergoes a profound structural realignment, the industry is pivoting from high-velocity speculation toward a mature and institutional-grade financial framework. In this evolving ecosystem, the metrics for success are no longer defined solely by return on investment but by the robustness of the underlying infrastructure. Central to this transition is the emergence of privacy not merely as an elective feature but as the fundamental “moat” required to support large-scale economic activity.

In a recent dialogue, Sonny Liu, chief marketing officer (CMO) at Mixin, detailed why the “transparency-at-all-costs” model of early blockchains is fundamentally incompatible with the requirements of a global economy. He argues that in crypto’s early days, transparency was actually an asset, with public addresses serving as badges of honor used to signal conviction or flaunt performance.

When participants were primarily managing speculative positions with limited exposure, the risk of a public ledger was negligible. However, Liu explains that this dynamic changes fundamentally as asset size and usage evolve. As crypto begins to handle everything from salaries and corporate treasuries to life savings, that same transparency becomes a liability, transforming a public ledger into a significant security flaw.

This shift became particularly evident in the second half of 2025 when interest in privacy coins surged. Some attributed this to a growing realization by many investors that privacy coins are not just speculative assets but a defensive hedge against financial surveillance. Indeed, by the last quarter of 2025, Grayscale had become the first institutional investor to launch a privacy coin-based investment product.

Explaining why privacy cannot just be seen as a “feature upgrade” in the next phase of crypto, Liu said:

It is a prerequisite for financial infrastructure to be usable at scale and over the long term. Privacy is not the opposite of compliance. It is the foundation that allows security, regulatory alignment, and sustainable usage to coexist. That is why, as crypto matures beyond speculation, privacy naturally becomes the true moat—not a marketing narrative, but an infrastructural necessity.

Liu also asserts that the competitive advantage for future crypto platforms is no longer just speed or low fees. Instead, the ability to provide a secure and confidential environment for transactions is what will give platforms the edge over competitors. Expanding on this point, Liu highlights a discrepancy between traditional finance and the transparent blockchain model.

He argues that no enterprise would accept a world where competitors can monitor their total balance or map out their entire web of suppliers and partners in real time. For individuals, a transparent balance is a permanent exposure of wealth that invites social engineering and physical threats.

Balancing Compliance and Confidentiality

Meanwhile, a critical challenge for developers is balancing this need for confidentiality with strict new global standards, like the European Union’s DAC8 directive, which mandates extensive tax reporting. Liu defines the goal as being “verifiable but non-revealing,” ensuring that while transaction legitimacy can be audited, sensitive personal details remain hidden from the public.

He insists that privacy-by-design can coexist with compliance-by-necessity, provided that privacy is the default state and compliance occurs at clear, limited boundaries. This approach mimics traditional interbank clearing systems, which fulfill compliance obligations without publicly disclosing every customer transfer. However, Liu identifies authorities’ presumption that users need to be monitored as the real challenge.

“The real problem is not ‘whether to comply,’ but whether the system assumes from the outset that users need to be continuously monitored. If privacy is treated as an exception—a feature that needs to be ‘temporarily enabled’—then any new regulatory requirements will ultimately be used to justify deeper levels of surveillance,” Liu said.

While many developers look to zero-knowledge proofs (ZKPs) to achieve this balance, Mixin takes a different path. ZKPs allow a party to prove a statement is true without revealing the underlying data, essentially transforming transparent verification into mathematical proofs. While Liu acknowledges their potential, he notes they can be computationally intensive.

Mixin instead relies on CryptoNote technology, providing a “direct information hiding” paradigm where the sender, receiver, and amount are hidden by default. To bridge the gap with compliance, Mixin utilizes a dual-key structure featuring a spend key for asset control and a read-only view key that users can voluntarily provide to auditors.

In contrast, Mixin’s architecture ensures that compliance does not evolve into surveillance because the system defaults to not collecting or exposing data. While many wallet providers are only now pivoting to privacy-first models, Mixin has spent nearly a decade building the technical plumbing for this exact paradigm shift.

By integrating the Signal protocol for encrypted communication and CryptoNote for transaction obfuscation, Mixin created a unified environment where data and value are equally protected. With over $1 billion in assets under management and a transaction volume exceeding $1 trillion, the platform’s metrics underscore a massive demand for this model.

Reflecting on his vision for sustainable financial infrastructure, Liu said: “We believe that truly sustainable financial infrastructure does not involve trade-offs between privacy and compliance, but rather, through design, allows each to return to their rightful positions.”

FAQ ❓

• Why is privacy critical in crypto’s next phase? Privacy is shifting from a feature to a core requirement for institutional‑grade finance.
• What role does the regulatory climate play?

Global directives like the EU’s DAC8 highlight the challenge of balancing compliance with confidentiality.

• How is Mixin addressing this issue? Mixin uses Cryptonote and dual‑key structures to hide transaction details while allowing selective audits.
• What makes this relevant to global investors? With $1B in assets and $1T in volume, demand shows privacy‑first platforms are becoming the new moat.