A new semi-permissionless privacy initiative, Privacy Pools, has debuted on Ethereum, enabling users to conduct transactions discreetly while demonstrating that their funds are not associated with any unlawful activities.
This privacy solution was unveiled by developers on March 31, garnering endorsements from notable figures, including Ethereum co-founder Vitalik Buterin, who personally supported the project and made one of the first deposits on the platform.
According to the developers, the tool employs “Association Sets” to group transactions into anonymous Privacy Pools, implementing a screening process to ensure those transactions aren’t tied to malicious actors like hackers, phishers, and scammers.
The dynamic nature of the Association Sets means that if a transaction is flagged later as illicit, it can be removed without affecting other deposits. If a deposit fails the screening, the user has the option to utilize the “ragequit” feature to retrieve their funds to the original deposit address.
This innovation aligns with the developers’ aim to “Make Privacy Normal Again” and comply with regulatory standards. Privacy tools have faced significant criticism from regulators in recent years due to their exploitation by individuals for laundering activities.
One such tool, Tornado Cash, was sanctioned by the US Treasury’s Office of Foreign Assets Control (OFAC) from August 2022 until March 2025 after its connection to around $7 billion laundered by the North Korean-backed Lazarus Group. However, following a ruling by a US appeals court deeming the sanctions unlawful in January 2025, Tornado Cash has since been removed from OFAC’s blacklist.
The developers mentioned that initial deposits will be capped at 1 Ether (ETH), although this limit is expected to increase as the privacy protocol undergoes further stress testing.
Privacy Pools Inspired by Influential Figures
Already, over 21 ETH has been channeled into Privacy Pools through 69 distinct deposits, including at least one from Buterin. The project developers also acknowledged receiving backing from organizations such as Number Group, BanklessVC, Public Works, and various angel investors.
In addition to Buterin, the developers expressed appreciation for the contributions of Chainalysis Chief Scientist Jacob Illum and two academics from the University of Basel, who co-authored a white paper in September 2023 outlining the framework for building Privacy Pools. Strategic adviser Ameen Soleimani was also involved in this paper, which has been downloaded over 12,000 times and cited in nine other academic works.
Furthermore, the Privacy Pool code successfully passed an audit from Audit Wizard, a smart contract auditing firm co-founded by a former Apple engineer.
According to the Chainalysis 2025 Crypto Crime report released on January 15, 2024, more than $41 billion in illicit transfers were recorded last year, constituting 0.14% of the total on-chain volume. While this represented an approximate 11% decrease from 2023, the figures could rise to around $51 billion as more addresses linked to criminal activity are identified.