Crypto’s impossible choice: When privacy and AML laws conflict

Lawyers say privacy laws and AML laws sometimes conflict and there’s no clear path to compliance for decentralized blockchain projects.

Crypto was originally most closely associated with anonymity, but in 2025, the crypto ecosystem has changed.

User privacy is diminishing, as new laws in different jurisdictions across the globe require Know Your Customer and ID checks for wallets or exchange accounts to combat money laundering. The increasing sophistication of blockchain analysis tools means that every transaction has a transparent trail that can be traced back to its source.

As a result, onchain privacy has become a major theme. In October, the Ethereum Foundation announced the formation of its Privacy Cluster, a group of some 47 researchers, engineers and cryptographers who are working to make the base layer of Ethereum private.

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