- Industry experts warn that crypto regulations are largely shaped by traditional finance professionals, leaving out crucial technology perspectives.
- The 2025 Coinbase data breach highlights risks tied to storing personal data for regulatory compliance.
- Privacy-enhancing technologies like decentralized digital IDs and zero-knowledge proofs could help reduce risks and protect users.
- Current and future regulations require more data collection by exchanges, raising concerns about user safety and privacy.
- Experts urge more technology advocates to take part in policy discussions to ensure regulations address crypto-specific challenges and innovations.
Daniel Taylor, head of policy at Zumo, states that current crypto regulatory discussions are mostly dominated by traditional finance legal experts and former regulators. Many technology leaders in the crypto sector are not involved in these conversations, creating a gap in how policy is shaped.
In May 2025, Coinbase experienced a data breach that exposed customer information collected during required identification checks. The company allocated between $180 million and $400 million to compensate affected users who suffered losses from social engineering scams that followed the breach.
According to Taylor, these problems can be addressed by adopting privacy technologies such as decentralized digital identities and zero-knowledge cryptography. These tools allow verification of user claims without storing or sharing sensitive information. Taylor emphasizes that if companies do not keep large amounts of customer data, they reduce the risk of leaks and theft.
The article also notes that regulations like the UK’s Travel Rule and Cryptoasset Reporting Framework demand exchanges collect and report more transaction and identity data. This trend, Taylor says, puts user privacy and physical security in danger, as publicly known holders become targets for violent crime, as has happened in several recent cases in France.
Taylor points out that the crypto industry has pioneered technical solutions like proof-of-reserves and privacy pools to meet compliance standards while protecting user privacy. He encourages technologists to actively join regulatory talks to help design better rules for the ecosystem. Taylor concludes, “If the sector wants the future to be different, we must ensure that the policy conversation is not held solely in a room of incumbents, TradFi lawyers and suits but rather takes wider perspectives into account.”
Without input from the technology side, Taylor warns that crypto regulations risk being based only on traditional approaches, missing the unique potential and requirements of digital assets. He calls for broader participation from technology professionals to help ensure that privacy and innovation remain central as new regulations are developed.
For more information on privacy risks and violent crypto-related crimes, readers can see recent reports highlighting these incidents.
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