Ethereum News Today: Privacy Pools Reconciles Crypto Privacy and Compliance, Securing $3.5M Boost

0xbow, the Nashville-based developer of Ethereum Foundation-backed Privacy Pools, has secured $3.5 million in seed funding led by Starbloom Capital. The round, announced Nov. 18, 2025, follows the integration of Privacy Pools into the Ethereum Foundation's Kohaku wallet, marking a pivotal step in aligning privacy-preserving technology with institutional compliance standards. Privacy Pools, which launched on Ethereum mainnet in March 2025, has processed $6 million in transaction volume across 1,500 users, demonstrating growing demand for tools that balance financial privacy with regulatory requirements according to the report.

The protocol employs zero-knowledge proofs and an Association Set Provider (ASP) to screen deposits and monitor transactions in real time, enabling users to prove their funds are not linked to illicit activity without revealing transaction details. This addresses a critical industry challenge: prior mixing services faced regulatory scrutiny for obscuring transactions, while public blockchains exposed users' financial data. "We're solving for something the industry hasn't figured out: how to give people financial privacy without creating a haven for illicit activity," said Nathaniel Fried, 0xbow's CEO. The ASP architecture allows institutions to customize compliance rules, a feature that differentiates Privacy Pools from earlier privacy tools.

The Ethereum Foundation's adoption of Privacy Pools in its Kohaku wallet signals institutional validation of the technology. This integration, demonstrated at the Cypherpunk Congress in Buenos Aires, reflects broader efforts to reconcile blockchain's transparency with privacy needs. The seed round also included participation from Coinbase Ventures, BOOST VC, and Ethereum co-founder Vitalik Buterin, who backed 0xbow in a March 2024 pre-seed round. Funds will expand Privacy Pools to additional blockchains and enhance features like multi-asset support, which already includes stablecoins such as USDC and USDT according to the report.

Regulatory uncertainty has long hindered institutional crypto adoption, exemplified by U.S. sanctions against mixing services like Tornado Cash. 0xbow's approach, however, offers a framework where privacy and compliance coexist. Taylor Monahan, a MetaMask security engineer and 0xbow advisor, emphasized that the ASP model "shows you can design for both privacy and accountability simultaneously." The company's technology also operates without centralized custody, mitigating risks of fund misuse according to the article.

With the funding, 0xbow plans to refine its ASP-as-a-Service offering, targeting other privacy protocols and blockchain ecosystems. The company's CTO, Ameen Soleimani, noted that modular architecture enables jurisdiction-specific compliance rules, a necessity as global regulations evolve. Privacy Pools currently supports ETH, wBTC, and major stablecoins, with withdrawals executed through zero-knowledge proofs to break on-chain transaction links according to the report.