Opinion by: Amal Ibraymi, legal counsel at Aztec Labs
When cybercriminals breached UnitedHealth’s tech unit in 2025, nearly 200 million people had their data exposed. A few months later, Coinbase admitted that overseas customer support agents had been bribed for access to user data. These are not isolated events; they are symptoms of a broken system.
Existing compliance rules meant to protect us force companies to stockpile vast amounts of sensitive personal data, creating irresistible honeypots for hackers. Most businesses don’t want this liability, but regulators demand it. This reality has led to the perception that privacy and compliance are fundamentally at odds.
It doesn’t have to be this way. Breakthroughs like zero-knowledge (ZK) proofs and decentralized identity make it possible to prove compliance without exposing sensitive personal data. This means verifying your age without revealing your birthday or confirming eligibility without disclosing your name. These technologies flip the script: Privacy isn’t a cost of compliance; it’s becoming its strongest ally and even a competitive advantage.
We’ve all been forced to pay a privacy tax
For decades, compliance has acted like a shakedown of personal data. Regulators require companies to prove they are not facilitating malicious activity and are in compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) laws. Historically, the only way for companies to ensure this is to collect large amounts of sensitive data about their users to verify their customers’ identities.
The result? Massive liabilities. Data leaks don’t just lead to embarrassing headlines; they put people at risk of identity theft, phishing and fraud. The “compliance by collection” model has turned everyday businesses into data warehouses, vulnerable by design.
Thanks to innovations like ZK-proofs, apps can successfully adhere to compliance rules without ever seeing or storing consumer data. Users can now confirm they’re not on a sanctions list without exposing their identities. They can also show they’re of age to trade without revealing their birthdates. For the first time in history, companies don’t have to sacrifice user protection to abide by the rules.
Compliance without the paper trail is the future
We now have the tools to break this cycle. Employing ZK-proofs to solve the issue of compliance and consumer protection isn’t simply a technical move; it’s a philosophical one. This shift marks the end of “compliance by collection” and signifies the beginning of “compliance by computation” and absolute privacy by default and design.
ZK-proofs are rewriting the rulebook on verification by removing the need for a paper trail altogether. They empower individuals to hold their credentials and only share a sliver of information when required. On top of that, privacy-preserving analytics can add another layer of protection, enabling oversight without forcing companies to dump vast amounts of raw personal data into centralized locations that are vulnerable to attackers.
Related: ZKPs can prove I’m old enough without telling you my age
These technical innovations aren’t just hypothetical anymore; they’re already in action. Last year, the Buenos Aires government integrated ZK-proofs into its city’s app to give its residents more privacy by default. The app is designed to provide users access to city services and sensitive documents, allowing them to show that they are of age to buy alcohol or record their vaccination statuses without putting that personal information at risk.
Companies that prioritize privacy will gain a competitive edge
Compliance isn’t optional for companies; it’s essential for continued operations. Enabling private data transactions is a choice, however, and the companies that choose to protect user data through ZK-proof-enabled solutions will have a competitive advantage, especially as consumers increasingly recognize privacy as a priority.
ZK-proof-enabled privacy solutions also create added economic incentives for implementation, such as increased retention and reduced audit costs. Regulatory bodies expect businesses to implement rigorous standards to prove they are meeting them, but historically, this has taken the form of companies collecting treasure troves of user data. These data honeypots attract bad actors and, in centralized systems, can lead to massive data hacks that make people vulnerable to identity theft, phishing scams and other attacks.
Privacy-preserving compliance flips the script: It allows companies to follow the rules while keeping sensitive information off the table, building trust and reducing risk in one go.
Customers are likely to trust brands that can prove they meet regulatory standards without stockpiling sensitive information. For example, tools like Calimero Network’s data verification and Taceo’s coSNARK network prove compliance while keeping personal details off the books. Solutions like ZKPassport empower people to prove their nationality, age or residency without exposing unnecessary information in the identity space.
This is the future of compliance: proof without overexposure. This approach reduces the fallout of breaches, cuts down on compliance overhead and aligns with global trends toward data minimization as mandated by privacy laws in Europe, the UK and state laws in the US. In crowded markets, that combination is a significant selling point. The brands that win will be the ones that can say, “We meet every requirement, and we still don’t know your birthday.”
Let’s aim for “just enough information”
Ultimately, the real question isn’t whether we can afford privacy; it’s whether we can afford to ignore it. Big tech and regulators must move beyond data hoarding and embrace new models that prove to be compliant while giving just enough information. Privacy-preserving compliance isn’t just a thought experiment. Today, it’s possible, it’s practical, and it’s absolutely necessary.
Opinion by: Amal Ibraymi, legal counsel at Aztec Labs.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
