Coinbase urges U.S. lawmakers to adopt ZKPs in financial regulations

Coinbase has called on U.S. lawmakers to incorporate zero-knowledge proofs (ZKPs) into the Bank Secrecy Act (BSA) to modernize financial regulation and improve privacy protections for users [1]. The firm’s Chief Legal Officer, Paul Grewal, emphasized that ZKPs could reduce the need for institutions to collect vast amounts of personal data while still enabling compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements. Grewal highlighted that individuals could prove their identity or financial status—such as not being on sanctions lists or being of legal age—without revealing the underlying data, with law enforcement still able to obtain necessary information through subpoenas [1].

The proposal underscores a broader shift in the cryptocurrency industry toward privacy-preserving technologies that align with evolving regulatory demands [2]. Coinbase argues that current compliance frameworks are ill-suited for the decentralized nature of digital finance and that ZKPs offer a scalable solution. By reducing the data footprint required for verification, ZKPs could streamline compliance for financial institutions and reduce operational burdens [3]. This approach is already being explored by projects such as Plume Network, which is integrating ZKP-based verification systems into real-world use cases.

The firm’s advocacy aligns with recent developments in U.S. crypto policy, including efforts by the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation to modernize regulations [2]. These initiatives reflect a growing recognition that regulatory frameworks must adapt to technological innovation rather than hinder it. Coinbase’s call for legislative reform signals a strategic shift in its relationship with regulators—from a more adversarial posture to one of collaboration and co-creation.

While no immediate legislative changes have been announced, the increased visibility of ZKP-based technologies is likely to influence future regulatory approaches. The U.S. National Institute of Standards and Technology is already evaluating ZKP protocols, suggesting that federal regulators are open to incorporating these tools into compliance standards. As discussions progress, cryptocurrencies and compliance protocols leveraging ZKPs may see greater adoption, particularly if lawmakers prioritize privacy-enhancing innovations [1].

Coinbase’s initiative highlights the potential for privacy and regulatory compliance to coexist in the digital financial ecosystem. By advocating for ZKP integration, the firm is positioning itself at the forefront of a technological and policy transformation that could redefine how financial institutions interact with both customers and regulators.

Source: [1] Coinbase seeks privacy overhaul in US finance laws (https://cryptonews.net/news/legal/31375675/)

[2] CLS Blue Sky Blog | Columbia Law School's Blog on (https://clsbluesky.law.columbia.edu/)

[3] Plume Network: How to Bring Real World Into Crypto (https://4pillars.io/en/issues/plume-network-how-to-bring-real-world-into-crypto)