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Today’s traditional banking system has become too comfortable in encouraging society to overshare while underdelivering on security guarantees. Never has a financial system demanded such a sacrifice of an individual’s personal data. KYC requires legal identity, biometric data, address history, and device fingerprints, which are all bundled together and stored indefinitely by third parties.
Summary
KYC turned privacy into collateral damage: Banks demand passports, biometrics, and device data — then store it in breach-prone databases that individuals can never truly reclaim.
Finance has shifted from neutral infrastructure to permissioned gatekeeper: Access can be frozen, revoked, or denied — turning participation into a conditional privilege.
Zero-knowledge tech offers a third path: Prove eligibility without surrendering identity, enabling transparency for systems and privacy for individuals.
Once that information leaves an individual’s control, it can be copied, breached, and sold to anyone. Even when companies act in good faith, the data itself becomes a liability. You cannot replace a passport the same way you can replace a lock. If we lose control of our fingerprint, address, and name, then who do we become if not a prisoner to an interdependent hive mind of capital structures that feed off the intelligence of the masses? For those who value privacy and autonomy, KYC isn’t a quality of life feature; it’s subconscious theft.
KYC: The irreversible surrender
KYC is often justified in the name of safety, but centralised safety is still a centralised risk. Large databases of sensitive information become magnets for attackers, insiders, and state actors alike. Recent incidents include Coinbase insiders exploiting customer data for extortion and Finastra, a software provider to 45 of the world’s largest 50 banks, losing 400gb of sensitive information in a data breach orchestrated by cyber criminals. History shows that no system is immune to breach, and no regulatory framework ever prevents exponential growth. What begins as ‘just for withdrawals’ quietly expands into continuous monitoring, indefinite retention, and mandatory sharing. Over time, the database itself becomes the weakest point in the system, and it rigs the world around you.
Neutrality in banking is dead
Last year, UK high street bank Lloyds was found to have used banking data from 30,000 of its own staff members to influence pay talks. This sort of treachery doesn’t just expose a dysfunctional system; it confirms that data will be used against individuals in plain sight. Blind consent can come at serious personal cost, whether implicit or explicit, and the reason it’s so alluring is that the consequence of failure rarely falls on the institution that collected the data; it falls on the individual whose lives become harder in ways that cannot be reversed.
There is also a deeper shift that happens once identity becomes a prerequisite for participation. KYC does not simply verify who someone is; it establishes permission. Someone decides who gets access, under what conditions, and with what ongoing oversight. Finance stops being neutral infrastructure and becomes a system of gates.
That change matters. A financial system built on permission inevitably reflects the values, incentives, and pressures of those who control it; accounts can be frozen, and access can be revoked. Geopolitical tensions rising across the globe, coupled with stricter KYC demands, mean that over 850 million people will soon, if not already, be excluded from digital banking systems altogether, not because they are criminals, but because they lack stable documents, stable addresses, or stable geopolitical status. For much of the world, financial access isn’t a right, but a merely temporary privilege.
This is why the claim that privacy is only for people who have something to hide has always been a toxic lie. Privacy is not about hiding wrongdoing, it is about preserving what makes each individual who they are, and protecting them from a world becoming evermore comfortable with surveillance. A society where all economic activity becomes an extension of your CV isn’t safe; it’s a surveillance state.
Privacy needs transparency to succeed
The challenge has never been choosing between privacy and transparency, but learning how to build systems that honour both equally. Transparency is essential for systems to function well. We need visibility into flows, patterns, and outcomes to detect abuse, improve infrastructure, and govern responsibly. While transparency requires visibility and authentication to be effective, it doesn’t need to see everything; it can still see movements, trends, and anomalies as a silhouette.
The rise of cryptography in recent years has seen significant breakthroughs in financial privacy technology. Zero-knowledge encryption layer 1 ecosystems such as Zcash (ZEC) and Monero (XMR) are surging as many firms are now weighing up the impact of becoming hardened by Zcash, bringing the relationship between privacy and transparency into sharper focus, as many search for a societal alternative to the normalisation of KYC practices.
Zero-knowledge encryption’s strongest asset is that it allows the general population to prove eligibility without revealing identity; selective disclosure that limits what is shared to what is strictly necessary; and user-held credentials that remove the need for centralised databases altogether. Transactions can be tracked under persistent, pseudonymous identifiers that allow systems to learn and adapt without tying activity to real-world identity. A participant can be recognised as the same actor over time, allowing for accountability, analytics, and improvement, without creating a permanent identity honeypot.
Things must get uglier before they’ll get better
Although the market is moving positively toward privacy in a world that feels more dangerous by the day, zero-knowledge encryption is still a long way from becoming the norm. This means anyone who values their privacy in 2026 will have to endure exclusion, loss, and uncertainty if they are not willing to comply with the alternative.
Every web3 breakthrough is inherently still a long-term experiment, one that intersects painfully with both financial traditionalism and conservative politics. New organisational forms are rarely elegant at the beginning, and unregulated early-stage blunders often spook the political establishment. Corporations, democracies, and public markets all went through ugly, unstable phases before they matured; decentralised systems will too.
Mistakes will be made, and scandals will happen, but infrastructure hardens over time, and what feels like a hefty compromise today becomes tomorrow’s default, and today’s gold standard will become tomorrow’s scandal. Once zero-knowledge practices are normalised, they will not contract, but expand.
After all, being at the tip of the spear means you can strike the heart first, and in time, when the world sees that the traditional banks have sold everyone’s souls down the river, the right people will be forced to pay attention.
