Stablecoins are inevitable but need digital dollars

Stablecoins have significantly evolved since their inception. They are now steadily becoming a part of everyday finance, serving as both a common payment mechanism and a reliable store of value, effectively addressing areas where traditional currencies sometimes fall short. Recent market statistics indicate that the total transaction volume for stablecoins exceeded $15.6 trillion in 2024, surpassing the transaction volume processed by Visa. Prominent financial institutions like PayPal, JPMorgan, and even Visa itself have recognized this trend and are eager to integrate stablecoins into their offerings. With the overall stablecoin market capitalization now above $230 billion, it’s easy to perceive them as a formidable force.

However, a significant hurdle remains that inhibits stablecoins from reaching new heights: the issue of privacy. Currently, every transaction—whether it involves USD Coin (USDC), Tether (USDT), or a newer option—is visible on a public ledger. Anyone can trace the amount sent, the timestamp, and the addresses of all parties involved. While this level of transparency is consistent with the foundational ethos of open blockchain networks, it poses considerable risks for both individual users and larger institutions.

Having dedicated years to developing privacy solutions in the blockchain space, I’ve witnessed stablecoins thrive without effectively addressing the privacy issue that undermines them. Individuals engaging in on-chain transactions unknowingly disclose a significant amount of personal information, including their spending patterns, purchasing history, and even connections with other wallets.

Organizations and businesses face an even greater dilemma. Sensitive information, such as payroll data and supplier contacts, becomes vulnerable on a public ledger, a scenario that is unacceptable in traditional finance. Consider a situation where you pay a contractor on-chain and then realize that your closest competitors can see exactly how much you’re spending. This unsettling scenario deters many businesses from adopting stablecoins, despite their potential benefits.

The Transparency Challenge

Privacy is not a luxury; it’s a necessity. In conventional banking, transactions occur discreetly, with measures in place to comply with legal obligations. You can’t casually discover your neighbor’s mortgage balance or your competitor’s payroll details just by glancing at their bank records. In contrast, most stablecoins allow anyone to uncover individual transaction histories via a blockchain explorer. This level of openness is quite uncommon in the financial sector and raises significant concerns.

Think about how this transparency impacts users’ feelings of safety and independence. If you’re transferring funds to a friend, you might be okay with revealing that a payment occurred, but not necessarily the entire saga of your financial activity. A third party can analyze your on-chain actions to deduce your spending habits, personal interests, and business affiliations. Such surveillance capabilities are alarming to regulators, as they blur the line between lawful users and criminals within a fully transparent system.

The current structure of financial regulations isn’t designed with public ledgers in mind. Regulators certainly want to monitor unlawful activities, but they also recognize that everyday transactions shouldn’t be part of the public domain. Presently, the regulatory tug-of-war surrounding stablecoins has resulted in uncertainty, with the UK postponing formal legislation and the European Commission exploring user protection measures while encouraging innovation. Meanwhile, in the U.S., officials regard stablecoins as a means to bolster the dollar’s standing on a global scale. However, this vast potential is overshadowed by a pressing concern: how can we ensure robust user protections without making every transaction a public record?

The Need for Confidential Stablecoins

For businesses, stablecoins could represent a transformative solution. They offer speed, reliability, and ease of use across international borders. However, serious enterprises also demand confidentiality—especially when dealing with payroll, sensitive billing, or supply chain transactions. Publicizing these details exposes organizations to risks. Competitive vulnerabilities, reputational damage, and potential hacking threats become real concerns.

For institutional acceptance, a balance must be struck. Regulators need to maintain adequate oversight to prevent criminal behavior, while companies require privacy safeguards that align with traditional financial standards. Without confidentiality, stablecoins will remain more of an experimental tool than a practical option for regular corporate transactions. Many companies are hesitant to adopt a payment solution that effectively broadcasts their internal operations, even if the system otherwise functions seamlessly.

Thus, privacy is not merely a personal preference—it is a strategic necessity. When we discuss stablecoins as potential digital dollars, we envision a currency that retains its value relative to fiat money and is broadly accepted worldwide. Achieving this is a considerable challenge without embedding privacy into their core framework. If stablecoins are to eclipse traditional payment systems, they must tackle the genuine concerns of their primary users—corporations, large institutions, and individuals who prioritize discretion.

Zero-Knowledge Technology: The Path to Real-World Adoption

A promising avenue forward is zero-knowledge proof (ZKP) technology. ZKPs enable one to validate a transaction or assertion without disclosing the underlying data. It’s not magic, but it comes remarkably close. This technology can demonstrate that a transaction is legitimate and compliant with all regulations while concealing specific details from public scrutiny.

For instance, a large manufacturer wishing to utilize stablecoins for international payments could do so using a ZK-enabled platform. The blockchain validates that the transaction adheres to legal guidelines. Regulators or auditors with appropriate access can confirm compliance. Nevertheless, the manufacturer’s suppliers, payment figures, and other confidential information remain concealed from general observers. This demonstrates how privacy can coexist with a system that is fully auditable where it is needed most.

The recent launch of 1USD on a privacy-oriented blockchain highlights the growing interest in this area. Such initiatives demonstrate that confidentiality in transactions isn’t just an ancillary feature; it’s an essential component for mainstream adoption. Our approach has similarly focused on building technology that safeguards on-chain transactions while allowing users to control which information is revealed. This represents the next logical progression in the evolution of stablecoins.

Encouragingly, regulators are beginning to realize that privacy does not inherently imply wrongdoing. In fact, effective privacy measures can streamline compliance, as investigators can bypass irrelevant data and rely on cryptographic proofs that affirm compliance with necessary regulations. This approach protects honest users from unnecessary scrutiny and minimizes opportunities for malicious actors to exploit public financial records.

Conclusion

Stablecoins have already proven their ability to handle massive transaction volumes—enough to exceed those of Visa, one of the largest payment networks globally. Major financial institutions support them for compelling reasons: they facilitate swift cross-border fund transfers, maintain stable values, and can be incorporated into a wide range of digital services. However, the hesitance of many businesses does not stem from concerns about speed or cost anymore. The issue of transparency remains a significant hurdle that could impede stablecoins from evolving into a truly mainstream currency.

To me, privacy is critical to the success of stablecoins. We shouldn’t have to accept a reality where utilizing a digital currency means surrendering our confidentiality. Traditional finance has successfully managed to keep transaction specifics out of public view while adhering to regulatory standards, and there’s no reason stablecoins cannot follow suit. Zero-knowledge proofs and similar cryptographic techniques are paving the way for a private, compliant digital dollar.

This is the vision we should strive for: a private digital currency that melds the convenience of blockchain technology with the trust and discretion expected in financial transactions. The technological means to achieve this is within our grasp, and the next step involves the wider industry—developers, institutions, and regulators—committing to make privacy the standard rather than an afterthought. When this occurs, stablecoins will be genuinely prepared for mainstream recognition, and the dream of a stable, secure digital dollar will evolve from an aspiration into everyday reality.