Regulations, custody services, and exchange-traded funds are the most popular subjects for Bitcoin and crypto in general at the moment. Investors are waiting for 2019 to be the year where the BTCs ETF proposals get accepted and there comes regulation clarity in the crypto space. There are a number of factors which have been blocking crypto regulations and ETFs, which include security issues, manipulative and fraudulent activities, lack of custody services and surveillance issues.
Zero-Knowledge proofs have somewhat contributed to the fraudulent activities, as Monero (zk-SNARKs) has become one of the most prominent currencies used on the dark web because of its anonymity and lack of traceability. The question that arises is that are Zero-Knowledge proofs contributing to the already present hurdles in regulation? Regarding this, Ricky Li, co-founder of Altonomy (a crypto asset management firm for institutional grade investors), was of the view that zk proofs might be a hurdle in the way of regulation but they provide top level anonymity and privacy for the transacting parties. According to him, there’s a new protocol through which single transactions are not saved on the chain, which might be a no-no for regulators. He stated, talking to BlockPublisher also briefly explaining ZK-proofs,
I wouldn’t call it a hurdle. Transaction information is saved on chain with zero knowledge proofs. Even though the details of the transaction are masked to provide privacy, regulators can still chase to get the data at anytime they want. The new “Mimblewimble” protocol is different in that single transaction is no longer tracked or saved on chain. The proof-of-record is one-way only and true privacy is guaranteed. It is not regulation friendly but serves the whole purpose of what it is created for.
Recently, another Zero Knowledge proof was implemented on the stable coin Dai, namely zkDai, by the team of Arpit Agarwal in ETHSingapore. He explained his views regarding zero-knowledge proofs and their negative use stating,
Everything has 2 sides to it – you can use a screwdriver to poke someone’s eye but you can’t use that to stop producing screwdrivers.