The Owl Explains Hootenanny Ava Labs x CBER Ep 7: Blockchain Privacy and Regulatory Compliance
Professor Fabian Schär (University of Basel) discusses the ability for blockchain users to attain privacy in their transactions while also remaining compliant with regulations. Of note, prominent blockchains do not provide anonymity as commonly believed; rather, forensic methods can be used to reveal the transaction behavior of users. Mixers (e.g., Tornado Cash) combat forensic methods and offer further privacy. Nonetheless, mixers have come under regulatory pressure because they can be used for illegal activities such as money laundering. This podcast explains why blockchain identities are not anonymous and the details surrounding mixers. The podcast then explains a method whereby a user employing a mixer could prove that they have not participated in money laundering, potentially achieving both privacy and regulatory compliance. Regulatory implications are discussed.