Regulators Must Catch Up To The New Privacy Paradigm

Opinion by: Agata Ferreira, assistant professor at the Warsaw University of Technology

A new consensus is forming across the Web3 world. For years, privacy was treated as a compliance problem, liability for developers and at best, a niche concern. Now it is becoming clear that privacy is actually what digital freedom is built on. 

The Ethereum Foundation’s announcement of the Privacy Cluster — a cross-team effort focused on private reads and writes, confidential identities and zero-knowledge proofs — is a sign of a philosophical redefinition of what trust, consensus and truth mean in the digital age and a more profound realization that privacy must be built into infrastructure.

Regulators should pay attention. Privacy-preserving designs are no longer just experimental; they are now a standard approach. They are becoming the way forward for decentralized systems. The question is whether law and regulation will adopt this shift or remain stuck in an outdated logic that equates visibility with safety.

From shared observation to shared verification

For a long time, digital governance has been built on a logic of visibility. Systems were trustworthy because they could be observed by regulators, auditors or the public. This “shared observation” model is behind everything from financial reporting to blockchain explorers. Transparency was the means of ensuring integrity.

In cryptographic systems, however, a more powerful paradigm is emerging: shared verification. Instead of every actor seeing everything, zero-knowledge proofs and privacy-preserving designs enable verifying that a rule was followed without revealing the underlying data. Truth becomes something you can prove, not something you must expose.

This shift might seem technical, but it has profound consequences. It means we no longer need to pick between privacy and accountability. Both can coexist, embedded directly into the systems we rely on. Regulators, too, must adapt to this logic rather than battle against it.

Privacy as infrastructure

The industry is realizing the same thing: Privacy is not a niche. It’s infrastructure. Without it, the Web3 openness becomes its weakness, and transparency collapses into surveillance.

Emerging architectures across ecosystems demonstrate that privacy and modularity are finally converging. Ethereum’s Privacy Cluster focuses on confidential computation and selective disclosure at the smart-contract level. 

Others are going deeper, integrating privacy into the network consensus itself: sender-unlinkable messaging, validator anonymity, private proof-of-stake and self-healing data persistence. These designs are rebuilding the digital stack from the ground up, aligning privacy, verifiability and decentralization as mutually reinforcing properties.

This is not an incremental improvement. It is a new way of thinking about freedom in the digital network age.

Policy is lagging behind the technology

Current regulatory approaches still reflect the logic of shared observation. Privacy-preserving technologies are scrutinized or restricted, while visibility is mistaken for safety and compliance. Developers of privacy protocols face regulatory pressure, and policymakers continue to think that encryption is an obstacle to observability.

This perspective is outdated and dangerous. In a world where everyone is being watched, and where data is harvested on an unprecedented scale, bought, sold, leaked and exploited, the absence of privacy is the actual systemic risk. It undermines trust, puts people at risk and makes democracies weaker. By contrast, privacy-preserving designs make integrity provable and enable accountability without exposure. 

Lawmakers must begin to view privacy as an ally, not an adversary — a tool for enforcing fundamental rights and restoring confidence in digital environments.

Stewardship, not just scrutiny

The next phase of digital regulation must move from scrutiny to support. Legal and policy frameworks should protect privacy-preserving open source systems as critical public goods. Stewardship stance is a duty, not a policy choice.

Related: Compliance isn’t supposed to cost you your privacy

It means providing legal clarity for developers and distinguishing between acts and architecture. Laws should punish misconduct, not the existence of technologies that enable privacy. The right to maintain private digital communication, association and economic exchange must be treated as a fundamental right, enforced by both law and infrastructure.

Such an approach would demonstrate regulatory maturity, recognizing that resilient democracies and legitimate governance rely on privacy-preserving infrastructure.

The architecture of freedom

The Ethereum Foundation’s privacy initiative and other new privacy-first network designs share the idea that freedom in the digital age is an architectural principle. It cannot depend solely on promises of good governance or oversight; it must be built into protocols that shape our lives.

These new systems, private rollups, state-separated architectures and sovereign zones represent the practical synthesis of privacy and modularity. They enable communities to build independently while remaining verifiably connected, thereby combining autonomy with accountability.

Policymakers should view this as an opportunity to support the direct embedding of fundamental rights into the technical foundation of the internet. Privacy-by-design should be embraced as legality-by-design, a way to enforce fundamental rights through code, not just through constitutions, charters and conventions.

The blockchain industry is redefining what “consensus” and “truth” mean, replacing shared observation with shared verification, visibility with verifiability, and surveillance with sovereignty. As this new dawn for privacy takes shape, regulators face a choice: Limit it under the old frameworks of control, or support it as the foundation of digital freedom and a more resilient digital order.

The tech is getting ready. The laws need to catch up.

Opinion by: Agata Ferreira, assistant professor at the Warsaw University of Technology.

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.