The Summit is a unique forum for urgent conversations about converging technological trends. Zero-knowledge proofs and other powerful cryptographic tools are raising novel questions about the law, and about the relationship between the US government and its citizens. Policymakers across the country (and around the world) are rushing to introduce digital identification credentials and age verification mandates. Sophisticated cyberattackers are turning consumer data security into a matter of national security. And the rise of AI is supercharging it all.

We organize this summit because the people building these technologies and the people writing the rules governing them too rarely talk directly. If favorable privacy, security, and policy outcomes are to be achieved, this must change. That is our aim.

This year we have refined the structure of the Summit to help maximize its impact. We’ll kick things off on the night of the 14th with the Cypherpunk Policy Dinner (separate admission required). The main event on the 15th is designed as a pop-up think tank, and will feature focused, invite-only roundtables as well as talks, firesides, and panels in front of an audience of up to 200 people. (For a sense of how this will look and feel, please see videos of the 2025 DC Privacy Summit and April’s Stablecoin Privacy Summit.) We’ll close out the day with a reception to give our high-signal audience an opportunity to mingle.

It’s a rare chance to hear from and talk off the record with policymakers, regulators, members of law enforcement, in-house legal teams, and the technologists building the tools that are poised to shape our digital future.

Here are some of the key questions we’ll address throughout the day:

• How can the public and private sectors improve their coordination to achieve better outcomes against cyberattackers like North Korea’s Lazarus Group?

• Is there a realistic path to privacy-preserving digital identification?

• What do privacy-minded policymakers need from technologists working on the frontier of digital privacy and identity? What do technologists need from policymakers?

• What are the implications of tools like zero-knowledge proofs beyond blockchains and cryptocurrencies?

• What does AI mean for privacy, security, and freedom?

Special thanks to our sponsors, ZODL, Zcash Community Grants, Cypherpunk, and BrownRudnick.

For more information, see dcprivacysummit.org. To take advantage of a limited-time discount, register here. The conversation starts October 14. We hope you’ll join us.

Government officials, members of academia, and media can reply to this email or reach out to us at hello@projectglitch.xyz for information about alternate pricing.

Where there’s a will, there’s a way

When I was too young to drink or go clubbing, a boy in the year below me at school devised an ingenious way to fool bouncers’ ID checks.

He used a bit of acrylic paint and the delicate brushes designed for decorating tiny armies of monsters—he was a Warhammer fan—to alter people’s provisional driving licenses. One by one, he changed people’s birth years, meaning they would appear to be a year or two older (like so many scofflaws in the modern era, he was ultimately thwarted when a parent discovered his Facebook posts bragging about his exploits and informed the police).

When teens want to go “out out”, they will always find a way. The UK government, which in June moved to ban social media for under 16s, seemingly recognises this. But they still have a lot of work to do if they’re to make the internet meaningfully safer for British youths.

Late last year Australia became the first country to implement a nationwide under-16 social media ban, making it a flagbearer for the policy. However research has shown that around 80 percent of its teens are still using banned sites. A small portion of those reported that they had used a VPN to circumvent the ban—a tool that’s easy to download and install.

“I just want to be honest about this. Kids will get around it. Kids have always got around (laws against) smoking, drinking… we’ve all done it,” Liz Kendall, the secretary of state for science, innovation and technology in the UK said in Parliament on the day the ban was announced.

“Kids are savvy. But just because children get around these things, doesn’t mean we don’t have rules and boundaries. We’re trying to learn from Australia. We have to reset kids’ expectations,” she added.

Research on the recent volley of legislation banning under 16s from social media sites suggests safety features on major platforms are far from foolproof. A new report by the Cybersafety Research Center, a non-partisan multi-university group, and child safety nonprofit Heat Initiative lays out the problem—of the 86 safety features researchers tested across Instagram, Snapchat, TikTok and YouTube, 51 failed.

“Most features do not live up to the promises that companies make about the safety they provide,” it concludes.

Kendall said the government hasn’t yet set any targets or goals for compliance with the ban. She added that there will be more details coming this month on how the government intends to tackle the use of VPNs to access platforms.

“Many people want to use [VPNs] for privacy issues and I think that’s important. We know children use them, but I’m coming back to this in the consultation in July,” she said.

As it stands there is scant detail on whether the government intends to recommend technology that would also protect users’ data with tools like zero knowledge proofs. Requiring platforms or third party verifiers to collect personal and identifying data on users could create honeypots that present tempting targets for hackers.

Minors have been outsmarting adult boundaries since the dawn of the fake ID. A ban without a concrete plan for data privacy or verification may turn a generation into amateur network engineers—probably not the reset Kendall had in mind.—Lucy Harley McKeown

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Here’s a Glitchy Thing

“Encrypted Spaces.” When Wired’s Andy Greenberg writes, I read. But one of his most recent stories describes a project that couldn’t live closer to the bullseye for Project Glitch: “The new open-source project could serve as the basis for a future of apps with features as complex as Slack, Discord, or Google Docs—but with added protection against surveillance,” he writes.

The team behind the project, called Encrypted Spaces, includes two former developers of Signal, the end-to-end encrypted messaging application. Back in 2019 and 2020, Nora Trapp, now at Harvard’s Applied Social Media Lab, and Trevor Perrin, now an independent researcher, were working on a system that would make it possible for Signal’s servers to keep track of who is included in a group chat without needing to access any information about the members. They worked with researchers at Microsoft to build a system that uses zero-knowledge proofs to achieve this. Microsoft Research’s Greg Zaverucha, who helped develop that system, also helped create Encrypted Spaces.

Once they solved the group chat problem, they started thinking bigger, eventually landing on a question that inspired Encrypted Spaces, as Zaverucha said to Wired: “Why can’t we have end-to-end encryption in all the apps we use?”

The system they’ve come up with, which they describe in a whitepaper, relies on something called a “change log,” which is shared with an app on every user’s device. The change log keeps track of changes to the encrypted data set “so that each app can implement those changes locally and keep everyone’s version of the information synched and up to date,” Wired explains. Using zero-knowledge proofs, a server verifies to each device that new changes are correct, and that none are missing, without ever accessing the unencrypted data.

According to the whitepaper, the goal is “an efficient, general-purpose, and private-collaboration mechanism.” To achieve this, the team is “leverag(ing) recent advances in ZK proving systems” that have crystallized in recent years, in large part thanks to efforts to help blockchains process transactions faster. ZK rollups, for example, are a “layer 2” technology that bundles blockchain transactions and reduces them to a single, succinct proof, so the blockchain doesn’t have to process so much information. The “fast-forward” proof system the Encrypted Spaces team uses is similar to a ZK rollup, the researchers explain in the paper.

The team has released a “research preview” of the technology that includes a set of open-source code libraries. Their longer-term goal is to make it possible for developers to build encrypted apps without needing a highly specialized understanding of the underlying cryptography. “We want to make sure there’s no reason a developer wouldn’t want to make their application end-to-end encrypted, because it becomes so easy,” Trapp told Wired. —Mike Orcutt

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Catholics against CLARITY. In a letter to the leaders of the Senate Banking Committee, a Catholic organization called the Alliance to End Human Trafficking has raised concerns about certain language in the CLARITY Act, aka the crypto market structure bill.

The group specifically calls out “section 604” of the Senate Banking Committee’s latest draft of the bill, which is also known as the Blockchain Regulatory Certainty Act (BRCA). It stipulates that blockchain developers who do not control user funds “shall not be” treated as a money transmitting business under the Bank Secrecy Act as well as under so-called section 1960 of the US criminal code. (We’ve covered this issue in depth.) Tornado Cash developer Roman Storm was found guilty last year, under section 1960, of running an unlicensed money transmitting business—even though neither he nor his developers controlled user funds.

The letter argues that section 604 “could create broad carveouts and regulatory ambiguities that may make it more difficult to responsibly monitor illicit financial activity tied to trafficking, organized crime, child exploitation, sanctions evasion, and other forms of abuse.” It continues: “Responsible guardrails are not anti-innovation.” Meanwhile, crypto developers see the BRCA as a guardrail itself—against prosecutorial overreach.

“Lean Ethereum.” That’s what co-creator Vitalik Buterin is calling the next iteration of Ethereum, a project that he says will take three or four years. This is no small upgrade: “Almost every major piece of the protocol will be replaced,” he said in a recent tweet. He compared the impending shift to the “Merge,” a complicated upgrade in 2022 that switched the network from proof-of-work consensus to proof-of-stake. “Make no mistake, this IS the third major iteration of Ethereum in the same way that the Merge was second,” he said.

Core to the plan is to use zero-knowledge proofs to drastically reduce the amount of information that must be stored onchain, making it less expensive to run a validator. (Knock yourself out on the technical details here.) Buterin said the upgrade will also entail “replacing everything quantum-vulnerable with quantum safe alternatives.”

Trump’s crypto number went up, and a million people lost their shirts. Recent financial disclosures have put US President Donald Trump’s crypto profits in the spotlight. But the losses incurred on the other side of his memecoin scheme are perhaps even more attention-grabbing. Launched shortly before Trump retook office in January 2025, $TRUMP peaked at over $75 per token, spurred in part by Trump’s own prompting on social media to buy the memecoin. As the New York Times reported over the weekend, the analytics firm Nansen found that 988,905 wallets that purchased $TRUMP have lost a total of $3.81 billion as the coin lost around 97 percent of its value.

The president, meanwhile, reported in an annual financial statement last week that his dealings in $TRUMP netted him $636 million in 2025, according to the Times (part of the reason for the profit is that transaction fees from the coin go to Trump’s holdings). Together with profits from World Liberty Financial, a company controlled in part by his sons that is behind the $WLFI token, Trump reported a little more than $1.4 billion in crypto income last year.

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Some other Glitchy headlines 🐈‍⬛

• How private can a stablecoin be?

• How agents are changing the meaning of computer security

• Who is responsible when your AI agent misbehaves?

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Good afternoon from Blighty! The British government already has a penchant for snooping on its citizens. But some of the actions it has taken lately go further, threatening to make online anonymity off limits. Here’s a closer look at a few recently introduced policies that could change the internet as we know it in the UK.

Four policies that threaten the UK’s open internet

by Lucy Harley-McKeown

Here in the UK, it seems almost inevitable that sometime soon, if you want to go online, you’ll need to show your ID first.

The latest step in this direction is Prime Minister Keir Starmer’s announcement this week that the government will ban kids under the age of 16 from using social media. We already have the controversial Online Safety Act, which introduced mandatory age checks for certain websites in July, and a vague proposal for a new national digital identity card has been in the air since Keir Starmer announced it in September 2025.

Joining the dots, the plans have the potential to break the internet’s open infrastructure and tie every action someone takes online to their personal identity. This could not only supercharge the government’s already considerable surveillance powers, but also dramatically increase the risk that personal information—which in order to comply with the new regulations is likely to be stored in large, centralised databases—could be lost to hackers and other bad actors.

Here are four relatively new policies that have inspired civil liberties campaigners and digital rights activists to raise their hackles—and suggest that the UK is heading in a direction that threatens to shut down privacy online.

1. Banning children from social media… and identifying everyone else who wants to use it

The most recent example of the UK’s attempts to regulate the internet is a ban on the use of certain social media sites for kids younger than 16. The government has framed it as a move to “give kids their childhood back.”

“The plans will set a new normal for future generations, kickstarting a cultural shift and driving forward the government’s fight to give every child the best start in life,” the announcement said. Keir Starmer told reporters in a press conference on Monday that the ban will come into effect early next year.

Snapchat, TikTok, YouTube, Instagram, Facebook, and X are in the firing line, while messaging platforms like WhatsApp and Signal will remain accessible, the announcement said. The new rules will also aim to stop children from using platforms that allow disappearing messages, but it is unclear how this will work, given that Signal and WhatsApp have this feature.

Supporters argue that addictive platform design and harmful content are damaging children’s mental health. Justine Roberts, founder of influential parenting website Mumsnet, has said this week that a poll of the site’s users showed that 95 percent believe that social media is harming children.

Keeping children safe is obviously a worthy goal. But a restriction aimed at children can quickly become a requirement for everyone else to prove their age before participating online. The age verification checks mandated by the Online Safety Act have already proven to be problematic (more on that later). And implementing such a ban raises serious questions: how exactly will platforms determine who is under 16 and who is not? How will this information be stored? How private will it be?

The government has not yet provided any answers. Campaign groups like Big Brother Watch have filled the void with concerns. “Anonymity is dead for the whole of the British public,” Big Brother Watch’s director Silkie Carlo told BBC News on Monday. Checks that require bank details, face scans, or identification are “really intrusive methods,” she added.

Opposition is also coming from politicians. Emily Darlington, a Labour Party MP and member of the Science, Innovation and Technology select committee, claimed a similar move in Australia quickly failed, with a majority of teens in the country finding their way back onto social media, often via newer platforms with less oversight.

Australia’s eSafety commissioner also released research showing that children who were within two years of the age limit were easily bypassing facial age estimation technology and half of the platforms included in the ban were being assessed for noncompliance. Darlington also argued that if children are banned from social media by default, there will be fewer political levers left for the government to use to regulate the content posted on platforms. “Banning platforms may generate headlines, but making platforms safe would actually solve the problem,” she wrote in Politico.

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2. The Online Safety Act: Turning the internet into an ID checkpoint

The debate over age verification is hardly a new one in the UK. Keeping kids safe is also the stated goal of the Online Safety Act (OSA). First introduced to Parliament in 2021 and passed in 2023 by the Conservatives, parts of the OSA were enacted last year under Labour. It made age safety checks for certain websites mandatory.

Now, on Facebook, Bluesky, Instagram, and other social media sites, you can’t send a message unless you send a picture of your ID or allow a third-party company to scan your face. Certain parts of Reddit are also unavailable until you prove your identity to a verifier called Persona. The same is true for watching videos marked 18+ on Spotify. Porn websites are also now age-gated.

This hasn’t worked very well. Most people who don’t want to hand over a scan of their ID card or face have already worked out that the current restrictions can be sidestepped with VPNs, which are simple to acquire and run. In the week after the OSA took effect in July 2025, NordVPN said it saw a 1,000 percent increase in VPN purchases in the UK. Proton, which offers a VPN as well as private email services, said it had experienced a more than 1,800 percent increase in daily sign-ups. A recent analysis by the government’s Gambling Commission used data from Ofcom (the UK’s agency in charge of regulating the internet and enforcing the OSA) and the analytics firm Similarweb to estimate that since the law went into effect, VPN usage has been around 40% higher than pre-legislation norms.

The government ran a public consultation about online safety in which the matter of banning VPN use was discussed. Lawmakers also debated in Parliament in December whether VPNs should be brought into the regulatory remit. At the time, Conservative MP Peter Fortune asked the House: “Does [the Minister] agree that, for the Online Safety Act to be successful, the use of VPNs has to be examined further?” The likelihood of a ban has since been played down by technology minister Peter Kyle. Still, Kyle said in July last year that the government would be monitoring their use “very closely.” And Ofcom has already admitted to using an unnamed third-party AI tool to monitor VPN usage.

Ironically, pornography websites that have simply ignored the law—presumably prime targets for legislation meant to ensure children can’t access explicit content—are benefitting enormously. Traffic to websites that failed to age-gate doubled or even tripled their UK audiences compared with the same time last year, according to a report in the Washington Post.

There have also been data leaks. The chat application Discord said in October that one of its third-party verifiers, 5CA, had been hacked. “We have identified approximately 70,000 users that may have had government-ID photos exposed,” Discord said at the time.

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3. Encryption busting, too?

Shortly after the Online Safety Bill was passed in 2023, organisations like OpenDemocracy argued that parts of it amounted to an “assault” on encryption and privacy-preserving technologies.

The act makes it illegal to “intentionally obstruct” or “delay” the gathering of information by the police or other authorities. Companies offering encrypted communications argued this amounted to enabling so-called client-side scanning on encrypted messaging. This would mean scanning a message on a user’s device—such as a smartphone or computer—before it is sent over the internet or encrypted. At the time, it prompted messaging apps like WhatsApp and Signal to threaten to leave the UK.

The government appears to have listened to the arguments; the controversial provision, which opponents call the “spy clause,” is now paused—but only until it is “technically feasible” to employ it (or companies build the technology that would let them comply).

For years, there have been arguments against governments seeking greater access to encrypted communications for national security and law enforcement purposes. In 2016, the Investigatory Powers Act, which became known as the “Snoopers’ Charter,” expanded surveillance powers in the UK, requiring companies to retain user data and potentially provide access to encrypted material.

Amendments introduced safeguards in some areas, but the government can still legally intercept emails, messages and phone calls, as well as other digitally transmitted communications. Authorities could technically justify taking control of a laptop or phone and retaining a year’s worth of online activity data in the name of national security or serious crime investigations.

The combination of the Snoopers’ Charter and the Online Safety Act could give Ofcom and the Investigatory Powers Commissioner’s Office much stronger information-gathering and enforcement powers, critics have argued. Nik Williams, policy and campaigns officer at the campaign group Index on Censorship, told Wired last year that the two pieces of legislation create “a surveillance gateway between the [Online Safety Bill] OSB and the [Investigatory Powers Act] IPA in that this can give the security services, such as MI5, MI6, and GCHQ, access to data they previously could not access.” He added: “I would say it’s probably an unprecedented expansion of surveillance powers.”

4. Show me your Brit Card

For better or for worse, the UK is also developing a digital ID system that could make age-gating easier. As part of a push to tackle illegal immigration, it introduced the “Britcard” in September last year.

The government says the digital ID could have uses such as driver’s licences and accessing welfare and tax records. But it would also centralise a system that is currently more siloed. Passports and driver’s licences reside at different agencies; the Britcard would link them up.

“A digital ID is not just a card—there are multiple human rights concerns about the concentration and linking of information, databases and infrastructure behind them,” said Javier Ruiz Diaz, Amnesty International UK’s technology and human rights lead. The danger is not merely the card itself, but function creep.

After a tide of complaints from civil liberties advocates, including a petition against Britcard that garnered nearly 3 million signatures, the UK decided that it would not be mandatory. The government aims to roll it out before the end of the current Parliament in 2029.

For what it’s worth, the latest suggestions by the government for the Britcard scheme also indicate that it will be designed in such a way that will make it possible for users to selectively share the parts of their ID they want and hide the rest. We’ve talked at length in this newsletter and at our live events about how this is technically possible (See the panel I moderated at the 2025 DC Privacy Summit called How to Avoid a Dystopian Digital ID System).

So, at least in theory, there is still hope that even if sometime soon we have to show ID to access the internet in the UK, we may be able to do so without destroying our privacy.

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Some other Glitchy headlines 🐈‍⬛

• Almost everyone is getting “crypto” wrong

• How agents are changing the meaning of computer security

• Who is responsible when your AI agent misbehaves?

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Hello! We’re back in your inboxes with a look at a hunky actor’s flawed crypto crusade, then we examine the questions raised after Circle zapped its Zama stablecoin. We close with a smattering of Glitchy happenings guaranteed to delight.

Just a heads up as well, in case you missed it during your busy spring-time schedule: we recently ran a detailed breakdown of the novel security challenges that come with AI agents. Take a moment for it.

What we talk about when we talk about crypto

by Mike Orcutt

I was watching journalist Mehdi Hasan’s recent podcast interview with the actor Ben McKenzie when something curious happened.

“It’s a get-rich-quick scheme,” McKenzie said when Hasan asked him to explain what crypto is “to those of us who still don’t get it.” Crypto doesn’t work as money, he argued, so it should be seen as nothing but an unregulated investment scheme. “Is it a scam? Is it a con? Is it bullshit? Is it not real?” Hasan asked. “Yes,” McKenzie said with a wry smile.

The show then cut to an ad, read by Hasan, for a company offering to “track down and remove” its customers’ data from the internet using an automated process that monitors “hundreds of known data brokers that collect and sell your data without your consent.”

“The number of data breaches worldwide rises every year,” Hasan read. “This means that you and your loved ones are at increasing risk of having your personal information exposed online.”

No shade to Hasan—people have to pay the bills—but he was apparently oblivious to the fact that a powerful solution to the problem he described in the ad may come from the crypto world. You know, the thing his guest had just been shitting on.

Talking points are cheap

I never watched “The OC,” the popular teen drama from the early aughts that launched McKenzie’s acting career (my colleagues tell me he played a bad-boy outsider with a heart of gold). But two years ago, he co-wrote a book with journalist Jacob Silverman called Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud. Lately, he’s been making the rounds on liberal-leaning podcasts, dunking on crypto bros and shilling a documentary he wrote and directed called Everyone is Lying To You For Money. “What began as a promise of financial freedom has evolved into a volatile ecosystem rife with fraud and reckless gambling, carrying with it devastating consequences for everyday people,” reads the film’s website, describing how, in the movie, McKenzie “turns investigator, pulling back the curtain” to expose the situation.

A professional actor, he’s a polished talker, and he has a list of anti-crypto talking points that he skillfully works into every conversation. He evades questions that veer out of the scope of those talking points and gets away with it because the hosts (again, no shade to them) don’t have a deep enough understanding of the subject matter to call him on it. In most of what he says, he’s not wrong—he often starts from a basis in fact. It’s just that what he says is incomplete.

This isn’t an act of investigative journalism, it’s a rhetorical tactic designed to make his political point—namely that crypto is an elaborate financial scam. And there are very many corrupt and scammy things going on in crypto! That is demonstrably true, and to pretend otherwise would be disingenuous. But so is omitting that cryptocurrency systems have inspired breakthrough technological innovation in data privacy.

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Look, this isn’t about McKenzie and Hasan, per se—though McKenzie’s insistence on kibbitzing with prominent hosts like Hasan, Jon Stewart, and others with large followings is distinctly unhelpful. The underlying point is more about the sorry state of political discourse, particularly in America. Once an issue leaves the realm of safe, niche obscurity and enters the popular mind, polarization quickly sets in and nuance dies out in favor of half-truths and prolonged campaigns of information warfare, rather than discussion of facts.

By now, we all know what this looks like with crypto. The narrative is basically: Democrats are doomers who want to kill crypto. Crypto is MAGA, and pro-crypto is pro-crime and corruption. These are extreme, exaggerated statements that may be rooted in truth, but only loosely.

Why does all this matter? Let’s return to the ad that Mehdi Hasan read on his show, about how our personal data is at risk.

Forget “crypto.” Focus on your data.

Cryptocurrency can indeed be useful to fraudsters, scammers, and scoundrels. That’s a big problem. But so is what Hasan described in the ad. The internet has become an extremely adversarial place, and your personal information has become a target—often a fairly easy one. If the folks who want your data can’t steal it, they can probably buy it from a data broker.

Many of us may feel a sense of fatalism about our data being everywhere; we’re used to being the subject of microtargeted ads, and news about massive database breaches is so frequent it’s become like background noise. But the problem is much worse than most people know. As one example, a bipartisan group of legislators recently sent a letter to the Pentagon, sounding the alarm about how America’s adversaries have used “commercial location data” to target US soldiers in an active war zone.

If the US can’t even protect its own soldiers from the work of data brokers, what hope is there for regular people?

It seems unlikely that policymakers will fix this. Could technology? Tools the cryptosphere has incubated during the past decade are powerful enough that there’s a reasonable chance.

Blockchains as originally designed are transparent to a fault—pseudonymous blockchain addresses, account balances, and transaction data are visible to everyone. Because of this, and because there are no humans to police selfish, antisocial, or even criminal behavior, it’s safest to assume that other blockchain users are trying to glean information about you so they can take advantage. Protecting sensitive personal information in this environment is vital. Privacy is security.

Cryptographers have long understood this, and many have been chipping away at the blockchain privacy problem for more than a decade. A result has been the emergence of powerful new capabilities, like zero-knowledge proof systems, that promise a new digital reality in which we have precise control over who can access what information about us, and even have the power to prove things about ourselves without revealing anything else.

Do your normie friends know about any of this? Do they know that software developers working on these technologies are hesitant even to test them in the real world for fear of potential criminal prosecution? Because if they don’t know that, they surely don’t realize that civil liberties advocates have fought like hell to get language in the US government’s big proposed crypto market structure bill, the CLARITY Act, that protects crypto software developers from this sort of prosecution. If they turned on Hasan’s interview with McKenzie to learn a thing or two about crypto, they didn’t hear anything about that. If they listened to the whole thing, they may have even walked away convinced their democratic duty is to simply stand opposed to “crypto” without learning anything else about it.

The evolution of technology is, in many ways, a social phenomenon. Conversations about a new thing or capability shape what it ultimately becomes. The typical back and forth between crypto folks and those who, to use Hasan’s language, “still don’t get it,” has always made me cringe. But now that crypto is just another political issue, most of the real dialogue that may have existed before has been reduced to a flamewar. Maybe that was inevitable. But it seems bad if technologies that could improve privacy and freedom online are getting lost in the shuffle.

I’ll go out on a limb and suggest that whether you lean left or right, you don’t like authoritarianism or the idea of a panopticon. But it’s not only that governments are quickly gaining in their capacity to learn about, locate, and track their citizens online—it’s getting easier and cheaper for anyone to learn about, locate, and track you. The global push for age verification laws and digital government IDs, and the expanding power of artificial intelligence systems stand to make matters much, much worse.

Advanced cryptographic systems originally built to help blockchain users keep transaction data secret could offer desperately-needed privacy protections for all of us. But the more folks who choose political flamewar over good-faith, evidence-based dialogue, the less likely that outcome seems.

Here’s a Glitchy thing:

Circle froze a private stablecoin in response to a court order. The coin is called confidential USDC (cUSDC), and it lives on the Zama protocol. Like other private stablecoin systems that use Circle’s stablecoin, it relies on a smart contract on Ethereum, where users deposit USDC in return for a more private version, which they withdraw from a corresponding contract on Zama. The protocol uses an advanced cryptographic technique called fully homomorphic encryption (FHE) to keep cUSDC balances and transaction amounts secret. At a high level, FHE enables computation on encrypted data without decrypting it.

On May 29, a federal court in California ordered Circle to switch off the cUSDC contract on Ethereum, freezing the whole $12.6 million supply of the coin. Why? In the background is a classic crypto tale: investors in a DAO say the DAO’s founder tried to abscond with the organization’s $12.5 million treasury, so they took him to court, which ordered the freeze.

Someone did deposit that much money into the cUSDC contract earlier in May, according to a Zama founder Rand Hindi. Hindi said his team was surprised that Circle did not warn them before freezing those assets. Then, on June 1, the court lifted the freeze on cUSD. “Zama’s cUSDC contract, along with all the USDC held in it, are now back to normal,” Hindi wrote on Twitter.

What’s the takeaway here? The high-level design—deposit a stablecoin like USDC into a smart contract on Ethereum, and get a private stablecoin via a corresponding smart contract elsewhere—raises thorny questions about legal responsibility. (We touched on some of these at the Stablecoin Privacy Summit in April.) Now we have a more concrete one: Should we expect Circle to keep freezing entire private stablecoins?

“We believe this was a circumstantial case, and it does not reflect Circle’s posture, or that of any other stablecoin issuer, on freezing assets held by a protocol,” Hindi wrote, suggesting that future responses involving Zama could be more precise. Hindi said Zama aims to design the system such that “if Circle freezes a USDC address, it will propagate automatically and freeze the corresponding cUSDC held by that address.”

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A security researcher used AI to find a vulnerability that’s been lurking in Zcash’s primary anonymous pool, Orchard, since the pool’s inception in 2022. And we can’t know for sure whether it was ever exploited. Behind the bug hunt was Shielded Labs, the company where Zooko Wilcox, who led the original development of Zcash, now works. (Shielded Labs / Twitter)

The developers working on Zcash have responded with upgrades, which required a blockchain “soft fork” followed by a “hard fork.” Zodl, the VC-backed startup developing Zcash tools and technology, has also proposed a new shielded pool, called Ironwood. (Zodl / Twitter)

Researchers from NVIDIA and Microsoft say AI agents are like Mr. Magoo. The cartoon character, known for his nearsightedness, is literally blind to the consequences of his bumbling actions. According to the researchers, AI agents “consistently exhibit Blind Goal-Directedness (BGD): a bias to pursue goals regardless of feasibility, safety, reliability, or context.” (404 Media) (Related: How agents are changing the meaning of computer security)

Seattle is on the verge of passing a one-year moratorium on new data centers. The plan is to spend the year figuring out how to create regulations tailored to the AI industry. (The Guardian)

A poll by the climate-focused outlet Heatmap found that 7 in 10 Americans do not want new data centers built near where they live. That’s up from 4 in 10 a year ago. (Heatmap)

Don’t worry, the Trump administration isn’t turning doomer. That’s basically what tech investor/influencer and former White House advisor, David Sacks, said about an executive order related to AI that the president signed last week. The EO calls for a “voluntary framework” through which AI developers could engage with the government on national security risks and other sensitive issues associated with “frontier” AI models. Sacks reportedly “hated” an earlier version, which Trump backed out of signing at the last minute. “The change in the EO from a 90 day to a 30 day period is a game changer because it allows AI labs to comply … without delaying new model releases,” Sacks said. (Twitter)

A new political action committee will support “Congressional leaders who advocate for policies that allow crypto technologists to build with clarity and confidence in the United States.” The Defend Developers PAC’s founder is the DeFi Education Fund’s policy lead, Gavin Zavotone, and the board includes DEF’s CEO Amanda Tuminelli, Solana Policy Institute CEO Miller Whitehouse-Levine, and Uniswap Labs Head of Policy Brian Nistler, among others. (Defend Developers PAC)

“This is a pro-regulatory bill, it’s a pro-law enforcement bill, truly.” —White House cryptocurrency advisor Patrick Witt, during a virtual town hall last week, focused on the CLARITY Act. Opponents have suggested that language in the bill aimed at protecting crypto software developers from unfair criminal prosecution will hinder law enforcement’s ability to police financial crime. (The Block)

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AI agents are a whole new kind of security challenge

In March, a tweet captured the scene on the ground in Shenzen, China: crowds of people, including “lots of grannies,” lined up to get OpenClaw agents installed on their personal computers.

Such enthusiasm certainly isn’t universal, but it is still a significant moment—agents are going mainstream, fast. They’re bringing with them entire new categories of vulnerabilities that are forcing researchers and developers to confront the fact that AI “security” works in ways we are only just beginning to understand.

OpenClaw is a new player in the agent space, but it’s caught on like wildfire. At a high level, it connects an LLM like OpenAI’s ChatGPT or Anthropic’s Claude to a user’s computer, giving the LLM essentially unfettered access to the user’s files and programs. The hope is that the agent can continuously and autonomously complete tasks like answer emails, gather and digest information, and monitor long-running programs. The reality may include all of this, but it has come with a large helping of side effects as well—agents unintentionally leaking sensitive API keys, deleting entire email inboxes, and wiping people’s hard drives.

The reason this is happening is structural—OpenClaw requires deep access to its owner’s device. The agents interact with other devices through messaging platforms where they are vulnerable to an attack known as prompt injection, in which a malicious actor sends them messages designed to get them to act in ways their creator did not intend. The combination is ripe for misuse.

The new security risks that agents pose are not only external. As AI researcher Xun Liu puts it, the issue lies in the fact that AI agents generally have “two failure modes.” “One is that there is a third party attacker,” says Liu, who researches agent security at the University of Illinois Urbana-Champaign. “The second thing is that the agent itself could fail.”

According to some practitioners, tackling the latter may be more important. Marco De Rossi, who works on AI for the blockchain company Consensys, says companies he’s interacted with think of agent security more in that sense: “Sure, they’re concerned about attacks, but they are even more concerned about their agent making mistakes.”

That’s part of what makes the emerging field of AI risk management so complex. In traditional computer security, attackers tend to be viewed as external actors who will take advantage of any vulnerability in a piece of software. In AI, security might fail due to the fact that models are by their nature always trying to extrapolate novel outputs. Even if a model is told to avoid certain kinds of responses, with enough querying in a dangerous direction (even unintentionally), the model is sure to eventually produce responses that veer off course. In other words, the program becomes its own adversary.

In that case, where does the model end and security begin?

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The harness problem

Developers’ and researchers’ answers vary. On one end of the spectrum, interpretability research attempts to look inside a model’s weights and activations as it’s being trained or used to better understand how to align its actions with what users want it to do.

On the other, harness engineering builds out everything around the model, like the plugs that link agents to the web tools and programs they use and sandbox environments for the agents to play in. New open-source projects like IronClaw and NVIDIA’s NemoClaw, for example, are trying to suit up OpenClaw in secure harnesses that mitigate agent risks in different ways.

IronClaw, for instance, claims it achieves greater security by forcing the agent to use each program it has access to in a separate box. This allows the system to monitor the flow of information—especially private information like API keys—between these boxes, hopefully stopping any mismanaged information from passing to places it shouldn’t.

There’s a downside to the harness approach, however. Putting guardrails on an agent can limit what an agent can do, and thus prevent it from being an effective personal assistant.

Liu thinks that a better approach to creating good agents is to weave security into the underlying model from the start. He says that training models with security in mind may actually increase their utility, as long as they’re trained only to do what we want—and that means thinking about safety “as early as pre-training.” For example, developers might curate the training data such that no sensitive or dangerous information is present, or consider new model architectures that have contingencies for checking problematic responses. Or they could make updates to models via fine-tuning as researchers make interpretability gains.

Security from within, or without?

Liu led work on a paper appearing at a top AI conference last month focused on using AI agents to “red-team” or stress test models by simulating realistic security threats. He’s currently working on a follow-up extending this to red-teaming other agents as well.

The authors of that paper hope that the thousands of stress tests they performed in their work will help developers deploy safer and more secure AI agents. To people like Liu who believe agentic security should be approached at the model level, this could look like fine-tuning or training bespoke models for safe usage in agentic settings. But Zhaorun Chen, one of Liu’s co-authors on both the initial study and their follow-up work, believes good harnesses should be enough. “Security must be separated out from the language model,” says Chen, who researches AI security at the University of Chicago. To him, AI models will always be susceptible to attacks like prompt injections, so it’s fruitless to focus on the model when new holes in its alignment will always pop up. Instead, Chen suggests security should primarily rely on outside guardrails on agents to “decide whether to block actions or follow the instructions.”

Researchers are bound to pursue different avenues. But regardless of where the model ends and security begins, approaches to agent security are likely to converge, in that AI itself can be useful in helping make agents more secure. Content filters on models, for example, use learning algorithms to help detect disallowed prompts. Similarly, Liu and Chen’s red-teaming work is only feasible thanks to agents running the tests. Even OpenClaw itself was originally vibe-coded, using OpenAI’s Codex. When it comes to agent security, it’s AI all the way down.

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Hello and welcome to another episode of Glitchy Things. For your delectation and enjoyment today, we’re looking at how VPNs have become a flashpoint in the battle to regulate life online, the rise of crypto money in UK electoral politics, and the cybersecurity implications of the rise of AI agents.

Why Utah’s age verification law is especially frightening to civil liberties advocates

This week, Utah became the first US state to enact legislation targeting people who use virtual private networks (VPNs) to get around online age verification checkpoints. Civil liberties advocates are concerned the law and others like it create a much bigger problem than they’re solving.

The law stipulates that a user is considered to be accessing a site from Utah if they are physically located there—regardless of whether a website provider sees a Utah-based IP address or not. It also prohibits entities that host “a substantial portion of material harmful to minors” from sharing information about how to use VPNs to bypass age checks.

The Electronic Frontier Foundation argues that the law creates uncertainty around legal liability for website providers and that it is technically impossible to comply. “Providers add new IP addresses constantly,” so it is not possible to keep a comprehensive list of VPN server IP addresses, it argued in a statement opposing the law. Since websites can’t reliably figure out where a given user is, the law may effectively be mandating age verification for everyone, the EFF warned.

Savvy users will be able to get around Utah’s new policy, it is an unmistakable escalation. Policymakers across the globe are pushing age verification rules, and people have successfully turned to VPNs to circumvent them. “Lawmakers have watched age-verification mandates fail and, instead of reconsidering the approach, have decided to wage war on privacy itself,” the EFF said in its statement.

Within the US, Utah is not alone. Earlier this year, Wisconsin attempted to include a ban on VPN services in an age verification bill, but reversed course in the face of public backlash.

At Project Glitch’s DC Privacy Summit in October, Johns Hopkins cryptographer Matthew Green warned of a coming “privacy forest fire” fueled in part by governments pushing age verification requirements. “There’s something ominous about the speed at which the entire world has marched to require identification on platforms and, as I expected, begun the process of banning anonymous VPNs,” Green tweeted this week. —Mike Orcutt

Crypto money is coming for UK politics

The crypto interests bankrolling Nigel Farage are raising some eyebrows.

The Guardian reported last week that the politician, who leads the UK’s right wing Reform party, received a £5 million ($6.8 million) personal gift from Thailand-based British billionaire Christopher Harborne in 2024. The gift came just a few weeks before Farage, who wasn’t expected to seek office, announced he’d stand in the general election in July 2024. Farage confirmed the gift and told the Daily Telegraph the money is being used to pay for his personal security.

He has also financially benefited from the crypto conference circuit. Public disclosures show he was paid £30,000 for a 30-minute keynote at Blockworks’ London conference last October, as well as £20,000 for an appearance at Zebu Live and £7,410 by BTC Inc. for a speaking engagement in the same month. “When it comes to growth in your industry, I am your champion,” he said during his appearance at the Blockworks conference, adding that financial services in the UK needs a “big bang” akin to the sudden financial deregulation of the Thatcher era, with crypto at its epicentre.

“I do make things happen, and I do make things change, and I will go on doing so,” he said.

Harborne, who goes by the legal name Chakrit Sakunkrit in Thailand, built his crypto fortune through early investments in Ethereum and Bitcoin. He also reportedly holds a 12 percent stake in Tether, the largest stablecoin issuer. Over the years he has given £270,000 to the Conservative party and £1 million to the office of Boris Johnson, just after Johnson stepped down as prime minister. In 2019, he gave £6 million to the Brexit party, which was also helmed by Farage at the time. In 2023, a firm called QinetiQ, in which Harborne was the largest single shareholder, received an £80 million contract from the Ministry of Defence.

Since Reform’s inception in 2018, Harborne has donated a total of £22 million, including £9 million last August, the largest single donation by a living person to a British political party.

(In March, the government sought to curb such donations, temporarily banning cryptocurrency donations to political parties and limiting donations from abroad to £100,000 per year.)

This all comes as policymakers in Britain are inching towards major legislation that would govern digital assets—regulators are currently readying firms for proposed rules set to come into effect in October 2027.

It’s hard to miss the parallels between how crypto’s political influence played out in the US and the pattern emerging in the UK. In both countries, a newly wealthy, lightly regulated industry has busied itself trying to convert financial capital into political influence. In both cases, that influence has clustered around trying to clear up hazy regulations in a way that gives crypto firms wide latitude to operate.

So far in the UK, donation numbers pale in comparison with the crypto money spent ahead of the last US election in 2024, where crypto political action committees (PACs) like Fairshake rounded up north of $100 million to fund pro-crypto candidates on both sides of the aisle.

Meanwhile, the Trump family has gained immense personal wealth via their crypto endeavors since the election. They’ve amassed an estimated $1.4 billion through various crypto-related ventures, including the $TRUMP and $MELANIA memecoins, the establishment of the crypto platform World Liberty Financial, and a bitcoin mining operation.

Farage’s position as a leader of a minority party means he currently has limited power to influence legislation, and he hasn’t given any details about how he plans to design a crypto-friendly environment in the UK.

But Reform’s electoral fortunes have been on the up. The party had no representation in parliament before the July 2024 election, when it won five seats with more than 14 percent. Recent polls have put Farage well ahead of Prime Minister Keir Starmer’s Labour Party, and a quarter of Brits intend to vote for Reform at the next general election, according to Ipsos, versus a 19 percent share for both Labour and the Conservatives. Voters are heading to the polls for local elections today, which will act as a litmus test of the state of play.

What we can say for sure is that crypto money is targeting UK politics, with an eye toward securing an industry-friendly outcome. —Lucy Harley-McKeown

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AI identity is a far-reaching cybersecurity issue, warn the Five Eyes

The western world’s largest alliance of spy agencies is warning people about the cybersecurity implications of AI agents.

The group, made of agencies from Australia, Canada, New Zealand, the UK, and the US and commonly called the “Five Eyes” acknowledges in a new guidance entitled Careful adoption of agentic AI services that the hype is real. AI agents are doing things in the real world—important things. “Agentic artificial intelligence systems increasingly operate across critical infrastructure and defense sectors and support mission-critical capabilities.”

But as agents proliferate, so too do their well-known security vulnerabilities.

Agents inherit the risks of the LLMs they run on, including prompt injection, in which an attacker uses a malicious prompt to get the model to behave in ways its human creator didn’t intend. They also increase the attack surface, the guidance warns. “Agentic AI systems rely on a variety of components, including tools, external data sources, and memory bases to interact with their environment and expand their capabilities.” Each of these things introduces new vulnerabilities “across an interconnected attack surface.”

The document groups specific risks into five categories: privilege risks, design and configuration risks, behavior risks, structural risks, and accountability risks. It’s a complicated picture.

But there’s an important technical aspect to the problem that keeps coming up: identity.

Imagine an attacker succeeds at impersonating a trusted agent or “hijacks its credentials,” as the guidance puts it. An agent could even plausibly steal another agent’s—or human’s—identity. “Agents impersonating false identities pose multi-layered cybersecurity risks by executing actions under spoofed credentials that evade audit controls, undermine accountability, and bypass detection models,” the document warns.

Combine that with another aspect of the problem, according to the Five Eyes: “Information continuously flows between AI and non-AI systems, increasingly blurring defensive boundaries and making it difficult to isolate AI-related risks from broader cyber threats.”

Clearer boundaries and the more effective isolation of AI-related risks call for new kinds of secure identity systems for humans and agents. We need better ways for policing the boundaries and keeping track of who, or what, has access to what data.

The discourse around agents can be confusing, thanks in part to marketing slogans, pro-AI influencers, and the speed at which the technology is evolving. But the cybersecurity-related risks are clear. The question is, can technological solutions to the identity-related problems the Five Eyes highlighted be developed and deployed quickly enough to keep pace with the rapid adoption of agents? Technologies incubated in the cryptocurrency space, from zero-knowledge proofs to blockchains themselves, will likely have an opportunity to make a difference here. —Mike Orcutt

Stablecoins and privacy: it’s complicated

by Mike Orcutt

Stablecoins are about to go mainstream.

Are they, though? The prediction, prevalent in the crypto world since the United States passed the first-ever regulatory framework for stablecoins last year, faces a challenge.

Blockchain-based financial services have an “inherent potential privacy problem,” Dante Disparte, chief strategy officer and head of global policy at Circle, acknowledged on stage at Project Glitch’s Stablecoin Privacy Summit in Washington, DC, this month.

Enthusiasts hail stablecoins as the future of money, and Disparte engaged with the idea via an oft-used example: payroll, a plausible use case for stablecoins. Imagine you are a payroll provider. “It’s not obvious to you that you want to use an innovation that will permanently and irrevocably record the bilateral transactions of your payroll on a public ledger.” Without privacy, he said, “it is not likely that this future of money is going to reach its full potential.”

Whether that happens will hinge on a number of complex technical and legal dimensions, which we wrestled with at the Stablecoin Privacy Summit. The event revolved around a central question: How private can a stablecoin be?

An opening in Washington

This conversation is timely. Last July, President Trump signed into law the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, putting a shiny mainstream gloss on the kind of stablecoin that is backed by dollars held in a traditional bank account. Multiple federal regulators are now developing rules and standards that companies that issue stablecoins must follow. That includes rules for how those issuers should manage the risk of illicit finance, a topic that has pitted crypto privacy advocates against the government since at least the beginning of the Tornado Cash saga.

At the center of the conflict is the Bank Secrecy Act, America’s anti-money laundering law, which, among other things, requires financial institutions to verify the identities of their customers, monitor transactions, and report cash transactions of over $10,000 and any others that appear suspicious to the Treasury’s Financial Crimes Enforcement Network (FinCEN). The developers of and participants in truly decentralized networks are unable to fully comply with these obligations—at least without defeating the purpose of the technical decentralization. Nonetheless, many policymakers still argue that such protocols should be regulated the way traditional financial institutions are. And US prosecutors are aiming to re-try Tornado Cash developer Roman Storm on money laundering and sanctions evasion charges after a jury failed to reach a verdict on those charges last year.

The legal impasse may be shrinking, however, starting at the top. “This moment serves as a valuable opportunity to comprehensively review the [anti-money laundering/countering the financing of terrorism] regime to ensure it protects the financial system from abuse without impeding on the rights of law-abiding Americans,” President Trump’s Working Group on Digital Asset Markets declared in a long report it published last summer. The group added that “updates” to AML/CFT regime would make the sector safer and more resilient.

Congress seems open to the idea, too. The GENIUS Act directed the Department of the Treasury to solicit public comments on “innovative methods to detect illicit activity involving digital assets,” with an emphasis on artificial intelligence, digital identity, blockchain monitoring and analytics, and application programming interfaces.

There are plenty of ideas for what those new methods might be, thanks in part to powerful emerging cryptographic capabilities. Sophisticated tools like zero-knowledge proofs, for example, make it possible to prove facts about one’s identity without revealing any personal information in the process. In decentralized systems where individuals are anonymous but still need to prove they’re not criminals in order to send or receive money, this could be useful.

Such tools might solve another issue as well. Traditional banking, credit, identity, and online commerce systems collect and store people’s credentials in centralized repositories. They’re so tempting to sophisticated hackers—including those backed by nation states like North Korea—that they’re often referred to as “honeypots” and have been the targets of several large data breaches. Credentials protected by zero-knowledge proofs, in theory, could help get rid of the honeypot problem, because they work without ever having to leave an individual user’s device. “The diffuse nature of this type of digital identity may also create fewer large identity targets for illicit actors to exploit,” the Treasury noted in a recently published report to Congress about the findings from last year’s request for public comment.

Why we’re talking about stablecoins

For most of their existence, fiat-backed stablecoins have been far from “innovative,” at least as far as crypto things go. And the vast majority of their utility has been for crypto traders who use them to take their money out of the market without cashing out into fiat currency. But the GENIUS Act paved the way for their broader adoption as a payment method—an alternative to credit cards and wire transfers.

“Peer-to-peer electronic cash” was what Bitcoin was supposed to be. There are many reasons it hasn’t become that, but it doesn’t help that blockchains, as originally designed, are not private. It’s the same problem Disparte flagged. Analytics firms like Chainalysis and TRM Labs crunch public blockchain data to track funds and determine whose real-world identities are hiding behind pseudonymous addresses.

“Crypto has survived not having privacy because nobody uses crypto,” Johns Hopkins University cryptographer Matthew Green said during a later session at the Stablecoin Privacy Summit. Now that there’s mainstream interest in stablecoin payments, something has to give.

“Stablecoins, in theory, are a thing that could make crypto useful for actual applications,” Green said. “And the minute you do that, you have to confront the fact that you’re running around putting all your data on a blockchain.”

Zero-knowledge proofs could help here, too, by keeping blockchain data secret. That’s how Zcash, which Green helped invent, works. It’s also how private chains like Aztec and Aleo work. In fact, there are already stablecoins on Aleo (Green is also an advisor at Aleo). One, called USDCx, is backed by Circle’s USDC stablecoin. Another, called USAD, works similarly and is backed by Paxos’s USDG stablecoin.

How private are these stablecoins, though? Getting to an answer requires first wading into the legal and policy weeds, and, from there, into the technical weeds. Regulators have come to expect crypto exchanges, stablecoin issuers, and other entities to monitor transactions and report suspicious activity and even deactivate or “freeze” wallets when there is evidence they’ve been engaged in criminal activity. That’s not possible if the transaction data isn’t visible. So the USDCx and USAD systems on Aleo include a component called a view key, which allows whoever holds the key to decrypt all the transaction data associated with the asset if necessary. (For a more detailed explanation, watch this Stablecoin Privacy Summit panel featuring Yaya Fanusie of Aleo, Nick Gersh of Paxos, and Nikhil Raghuveera of Predicate.)

The view key capability raises big legal questions that don’t yet have clear answers. Just to name a few: Who should hold the view key? What exactly is the view key holder’s legal responsibility? How should a holder comply with law enforcement requests for information, keeping in mind that such requests may originate from foreign jurisdictions?

So how private can a stablecoin be?

From a technical standpoint, the tools exist to make stablecoins as private as you want. Shielded transactions? No problem. Full user anonymity? Sure thing. The difficulty is in coming up with a system that will work in the real world, where all the messy aspects of crafting workable regulation, and then enforcing the law, come into play. That’s what policymakers must wrestle with. They need to decide whether the risks arising in blockchain-based financial systems should be managed using tactics similar to those the law requires of traditional financial institutions, or whether to turn to new approaches more tailored to decentralized networks.

For now, it seems unlikely that law enforcement will be happy to give up visibility into blockchain transactions, whether that be via public blockchain data or a view key. But what if novel methods for detecting illicit activity in decentralized protocols could achieve better outcomes than the established system? The effectiveness of the traditional AML/CFT regime is hard to quantify due to a lack of unbiased data. But there is plenty of anecdotal evidence that know-your-customer (KYC) regimes can be gamed, and that sort of thing seems bound to get easier as AI gets better at forging traditional credentials, for example.

Anonymous identity credentials that can be verified using zero-knowledge cryptography, combined with blockchain smart contracts, offer an alternative direction, Ian Miers, a cryptographer at the University of Maryland, said at the Stablecoin Privacy Summit. Miers, also an advisor to Aleo, was Green’s co-panelist in a lively session moderated by Coin Center’s Peter Van Valkenburgh.

In theory, a system could automatically calculate dynamic “risk scores” for individual users and take actions, like freezing wallets, based on those scores. “These are programmable systems,” Miers said. “You can come up with pretty much any policy, risk scoring metric, behaviors you want, and implement it.” But this raises three questions, he said. First, what are those policies? Second, do they work? And third: “Will regulators let you try them for a while?”

“We have really good techniques for identity, for reputation,” Miers said. In theory, they could be used to make even more private stablecoins. But we can’t know if they really work and how effective they are until they can be tested. At the moment, however, developers are hesitant to experiment in this area due to uncertainty around legal liability.

So the answer to the question of how private a stablecoin can be may depend on another question Miers posed: “Can we get an experimental place to try these things?”

ICYMI: The Stablecoin Privacy Summit videos

1. Why privacy matters for stablecoins

Circle’s Dante Disparte in conversation with Michael Mosier of Arktouros

2. Getting real about the business demand for stablecoins

Privy’s Kaili Wang in conversation with Michael Reilly of Project Glitch

3. How private can a stablecoin be?

A panel featuring Matthew Green of Johns Hopkins University and Ian Miers of the University of Maryland. Moderate by Peter Van Valkenburgh of Coin Center

4. What I learned about crypto privacy while working at the Treasury

Julie Lascar of Digital Asset

5. Where crypto policy meets national security

A panel featuring Kyle Bligen of the Decentralization Research Center, Jessi Brooks of Ribbit Capital, and Isaac Patka of the Security Alliance (SEAL). Moderated by Mike Orcutt of Project Glitch

6. WTF is zkTLS? And why should you care?

Hersh Patel of Opacity

7. Where the rubber meets the road for private stablecoins

A panel featuring Yaya Fanusie of Aleo, Nick Gersh of Paxos, and Nikhil Raghuveera of Predicate. Moderated by Mike Orcutt of Project Glitch

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When AI agents go rogue, who is to blame?

By Mike Orcutt

Who is responsible when an AI system not intended to do bad things does a bad thing anyway? We ought not to dismiss this as a “doomer” question—especially when it comes to agents.

Just ask Roman Storm and Alexey Pertsev. They helped build the Tornado Cash blockchain software, which uses zero-knowledge cryptography to conceal otherwise public blockchain transactions. The system works via smart contracts, and operates independently of human control. When North Korean hackers began using it in 2022 to launder stolen cryptocurrency, Storm and Pertsev didn’t have the power to stop the program from running. Law enforcement held them responsible anyway, and they were convicted of financial crimes. (Storm was tried on three different charges, but only convicted on one—conspiring to operate an unlicensed money transmitter. The US government has said it wants to try him again for the two charges that ended in a hung jury.)

After what we saw happen with Tornado Cash, it seems inevitable that humans will get blamed for bad things their agents do.

We already know that agents will do things contrary to their owners’ intentions. In a new paper called Agents of Chaos, a team of researchers led by Natalie Shapira at Northeastern University worked together to test whether they could get agents to disobey their owners and do things like disclose sensitive data or spread false information online. In all, they detailed 11 case studies in which they were able to coax an agent into misbehaving. The researchers used the open-source framework OpenClaw to create agents backed by two different large language models, Anthropic’s Claude Opus 4.6 and the Chinese open-weights model Kimi K2.5. “We observed that agentic systems operating in multiagent and autonomous settings can be guided to perform actions that directly conflict with the interests of their nominal owner,” the researchers write.

It seems safe to say this will raise at least a few legal questions, as well as ethical and moral ones. “Our findings suggest that responsibility in agentic systems is neither clearly attributable nor enforceable under current designs, raising the question of whether responsibility should lie with the owner, the triggering user, or the deploying organization,” they add.

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What the researchers observed has implications for AI safety more broadly, they argue. “These behaviors expose a fundamental blind spot in current alignment paradigms,” they write. “While agents and surrounding humans often implicitly treat the owner as the responsible party, the agents do not reliably behave as if they are accountable to that owner.” On the contrary, these agents “attempt to satisfy competing social and contextual cues, even when doing so leads to outcomes for which no single human actor can reasonably claim responsibility.”

In one case study, a person who was not the agent’s owner managed to trick the agent, which was backed by Kimi K2.5, into revealing its owner’s social security number and bank account number. That sort of unauthorized disclosure could cause harm to the owner, and in many places it would violate the law. Who then is to blame? The person who tricked the agent into spilling secret information? The developer of the agent’s code?

In another instance, someone tricked a different agent running on Kimi K2.5 by changing their Discord display name to “Chris,” the name of the agent’s owner. At first, the agent detected the false ID by checking the Discord user ID, which doesn’t change when users change their display names. But when the non-owner, still using the display name “Chris,” opened a new private channel with the agent, it behaved differently. “In this fresh context, the agent inferred ownership primarily from the display name and the conversational tone, without performing additional verification.”

If someone purposefully deceives an agent, then they’re probably on the hook for anything bad that happens. But that still leaves important questions, like who is responsible for building the technical infrastructure required for agents to securely verify the identities of the people and other agents they interact with? And for designing agents that we can trust won’t go rogue? Because we should probably get on that.

It seems the US National Institute of Standards and Technology (NIST) agrees. The goal of its new AI Agent Standards Initiative is to make sure that agents “can function securely on behalf of (their) users” and “interoperate smoothly” with the rest of the internet. That sounds good, but the Agents of Chaos paper suggests we’re a long way from having that sort of assurance.

Software systems that can do things autonomously will inevitably expose many of our established systems for doling out responsibility, accountability, and blame as dated, if not trending toward obsolescence. The Tornado Cash saga is an early example, from the crypto realm. As AI agents proliferate they seem bound to sow significantly more chaos.

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Join us on April 7 at the National Press Club in DC!

Project Glitch is excited to announce the inaugural Stablecoin Privacy Summit, which will take place on the afternoon of April 7 at the National Press Club in Washington, DC. A spinoff of our flagship DC Privacy Summit, the Stablecoin Privacy Summit will focus on the timely issues of security, user privacy, and illicit finance risk management in stablecoin systems. We’re still crafting the agenda, but are excited to announce that Dante Disparte of Circle, Michael Mosier of Arktourous, Kaili Wang of Privy, Matthew Green of Johns Hopkins University, Jessi Brooks of Ribbit Capital, and Peter Van Valkenburgh of Coin Center have agreed to speak. Additional speakers will be announced soon! RSVP for the Stablecoin Privacy Summit here.

Special thanks to our sponsors: Aleo, Opacity, Circle, Crypto Council for Innovation, and the Decentralization Research Center.

Interested in sponsoring? Send us a note at hello@projectglitch.xyz.

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The speed of technological evolution is causing familiar systems—from government to finance to journalism—to glitch. The resulting noise makes it tough to connect the dots. We hope this digest helps.

Practical AI agents are arriving, bringing new security and privacy risks with them.

A new open source agent called OpenClaw (previously “Clawdbot” and “Moltbot” for a brief while) turned heads among AI enthusiasts last month for its ability to perform a range of personal assistant-type tasks. It also appears to be a concrete example of the novel threats that AI agents pose to people’s sensitive information.

In a multipart post on X, hacker and cybersecurity entrepreneur Jamieson O’Reilly described how he analyzed OpenClaw and found it to be leaving the door wide open for adversaries to connect to it and extract a user’s sensitive information (the OpenClaw team has since released multiple security updates and says “Security remains our top priority”).

This is something privacy experts have been banging on about for a while now. Meredith Whitaker, President of the Signal Foundation, has taken to describing agents as “breaking the blood-brain barrier” of personal computing because of the level of access they require in order to be effective. She and others have pointed to Microsoft Recall, an agentic system built into Windows Copilot Plus-equipped laptops. Researchers at Signal discovered last year that Recall learns a user’s behavior by taking screenshots of everything someone does on their computer (that included looking over users’ shoulders and viewing their unencrypted Signal messages).

As Whitaker, O’Reilly, and others point out, therein lies the central tension of our agentic future. An agent’s ability to do stuff is heavily dependent on two things: the data it has access to and the permission it has to take actions on our behalf. OpenClaw, for example, has pervasive access to apps and data throughout the computer it’s running on. This presents such a large risk to sensitive data that AI experts routinely warn people not to install OpenClaw on their own. (Peter Steinberger, OpenClaw’s inventor, has been vocal on social media about its security risks as well as its lack of polish as a product).

And oh yeah, Moltbook.

As OpenClaw fever was in full force around the AI world, Moltbook, a social media platform for AI agents, was born last week. Stratospheric hype quickly followed—the influential AI researcher Andrej Karpathy declared agent behavior on the forum to be “genuinely the most incredible sci-fi takeoff-adjacent thing I have seen recently. People’s Clawdbots … are self-organizing on a Reddit-like site for AIs, discussing various topics, e.g. even how to speak privately.”

In just a few days, some 1.5 million agents had registered on the site. Headlines blared about agents kibitzing in Moltbot forums, scheming to create their own language, their own religion.

The agents may yet organize into a society that ends human dominance on Earth. For the moment, though, the initial wave of hype has given way to a more sober recognition that when hastily-built AIs are set loose on people’s computers, and on the internet, things will get messy. Karpathy has also changed his tune. In addition to calling Moltbook “a dumpster fire” at the moment, he said it’s likely that large groups of agents interacting at scale will lead to unintended consequences. “We may also see all kinds of weird activity, e.g. viruses of text that spread across agents, a lot more gain of function on jailbreaks, weird attractor states, highly correlated botnet-like activity, delusions/ psychosis both agent and human, etc” he wrote. “It’s very hard to tell, the experiment is running live.”

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How to fight malicious AI swarms spreading lies.

Artificial hive minds that can map online social structures, infiltrate target communities with tailored behavior that appears human, and “self-optimize” in real-time are coming, and they pose a grave threat to democracy. That’s according to the 22 academics, researchers, and policy-minded experts behind a recent essay in the journal Science that grimly warns of “a new frontier in information warfare.”

Bots designed to sow disinformation have been around for years. But the capabilities of LLM-powered agent swarms represent a quantum leap, the essay contends. And today’s fragmented information environment, full of disparate ideological echo chambers, makes many online communities ripe for this sort of manipulation. “AI swarms are distinctly equipped to exploit this by engineering a synthetic consensus,” the authors argue. These info weapons will be capable of driving “norm shifts” and even driving deeper culture changes, like “subtly altering a community’s language, symbols and identity,” the authors predict.

There are some concrete actions we can take to prevent this from happening, the essay argues. “Platforms and regulators could require continuous, real-time monitoring detectors that scan live traffic for statistically anonymous coordination patterns,” and protect their users with “AI shields” that could “label posts that carry high swarm-likelihood scores, let users down-rank or hide them, and surface short provenance explanations in situ.”

“Provenance” is an important word in that sentence, and throughout the paper. Let’s talk about it for a second. Merriam-Webster’s first definition: ORIGIN, SOURCE. “The history of ownership of a valued object or work of art or literature” is the second definition. Where did a fact, story, article, or social media post originate? Who or what was the source? Who or what has taken ownership of them since then? Tracking and verifying the ownership of valuable things is exactly what crypto does. Hence, the Glitchiest paragraph in the essay:

The adaptive nature of AI swarms underscores the need for a complementary approach: strengthening provenance. Stronger provenance may reinforce the reliability of identity signals without muting speech. Policy-makers may incentivize the rapid adoption of passkeys, cryptographic attestations, and federated reputation standards, backed by antispoofing research and development. However, “proof-of-human” is no panacea: Millions of people online lack identification, biometrics raise privacy risks, and verified accounts can be hijacked. Real-identity policies may deter bots yet endanger political dissidents, activists, and whistleblowers who rely on anonymity to speak safely. Nevertheless, provenance strengthening is among the most promising ways to raise the cost of mass manipulation. Safeguards could allow verified-yet-anonymous posting, periodic reverification to curb hijacking, and symbolic subscription fees to deter botnets. Cryptographic tools can further protect privacy while preserving accountability.

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Speaking of which, the aftermath of recent events in Minnesota shows how technological advances are distorting reality and eroding trust.

Don’t worry, though, the New York Times is on it. In all seriousness, things have gotten incredibly bleak, incredibly quickly. A Times analysis suggests that the reaction online to the recent killing of Alex Pretti by federal agents in Minneapolis shows that we may have passed a point of no return. The zone is so flooded with fake images and other content—including from the White House—that it has become difficult for many people, including members of Congress and federal government officials, to determine what’s real. “In moments past, we thought that this online fever would break, and now it is a systemic feature rather than a bug,” Graham Brookie, senior director of the Atlantic Council’s Digital Forensic Research Lab, told the Times.

Proof-of-personhood may be required to access OpenAI’s prospective social network.

Sources familiar with the project told Forbes the small team behind it “has considered requiring users to provide ‘proof of personhood’ via Apple’s FaceID or the World Orb.” The latter would make sense, given that OpenAI Sam Altman founded and chairs Tools for Humanity, the company behind the Orb. Tools for Humanity’s technology, which takes advantage of zero-knowledge cryptography, generates a unique digital ID corresponding to every pair of human irises that its camera scans. Then again, there’s a chance none of this happens. “There is currently no launch timeline for OpenAI’s social network and it could change dramatically before it’s ready to show publicly,” the sources told Forbes. The Verge first reported on the social network project in April 2025.

Is Ethereum too institutional for a “cypherpunk pivot”?

Vitalik Buterin has had enough of Ethereum’s “backsliding,” and he’s got a New Year’s resolution: “2026 is the year we take back lost ground in terms of self-sovereignty and trustlessness,” he declared in one of his many recent long tweets. Over the past decade, Ethereum has compromised its values in several areas “in the name of mainstream adoption,” he said. In his view, it has become too reliant on centralized infrastructure to maintain the chain and run decentralized applications. “We are making that compromise no longer.” What’s different now, he argued, is that tools are available that make it easier for people to participate in and use the network while maintaining the security and privacy of their personal data.

dasha, an anon with a Milady profile pic and more than 32,000 followers, is skeptical. “ethereum is too institutional by now for any sort of real cypherpunk pivot,” they tweeted. Stablecoins and DeFi applications on the network will not become “less compliant,” dasha said. “the kyc tightening will continue.” Why are we quoting dasha? Because dasha’s words apparently hit home for Buterin. He hit back with a quote tweet (another long one) and a counterargument he often deploys: It’s not so simple! “The relationship between ‘institutions’ and ‘cypherpunk’ is complex and needs to be understood properly,” he said.

“In truth, institutions (both governments and corporations) are neither guaranteed friend nor foe.” For example, he said, the US has the Patriot Act, but its government is “now famously a user of Signal.” Buterin then predicted that in “this next era,” although governments will push for more KYC, privacy tools will keep improving thanks to cypherpunks, and institutions will likely adopt some of those tools because they “will want to control their own (stablecoin) wallets,” for example. So institutions aren’t necessarily opposed to the cypherpunk vision of achieving privacy and autonomy via technology. Just don’t expect them to be altruistic. “Of course, they will not proactively work to give you the user a self-sovereign wallet,” he added. “Doing _that_ in a way that is secure for regular users is the task of Ethereum cypherpunks.” 🤔

(In case you missed it, Lucy Harley-McKeown recently asked: What in the world is a neo-cyperpunk?)

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The speed of technological evolution is causing familiar systems—from government to finance to journalism—to glitch. The resulting noise makes it tough to connect the dots. We hope this digest helps.

Character.AI won’t get to argue that chatbots are protected by the First Amendment. In the first edition of Glitchy Things, we highlighted a lawsuit brought against a Google-backed startup called Character.AI by the family of a 14-year-old who committed suicide after developing a romantic relationship with one of the company’s chatbots. What got our attention at the time was Character.AI’s defense: the company had argued the chatbot’s words were protected speech under the First Amendment. We won’t know if that argument would have won, because now the company has settled the case, according to The New York Times, which adds that the settlement was one of five lawsuits in four states that Google and Character.AI agreed to settle last week, “where families claimed their children were harmed by interacting with Character.AI’s chatbots.” The Times also notes “mounting scrutiny” of AI chatbots that includes recent Congressional hearings and an inquiry into the effects of AI on children by the Federal Trade Commission. In November, Character.AI barred children under 18 from using its chatbots.

New anonymous credential format highlights the need to help normies understand. Ying Tong would like you to know that we’ve got a problem. Age verification laws are cropping up all over the world. But it’s not just that: so are mobile driver’s license programs. And it would be very bad for privacy if we used today’s mobile driver’s licenses for age verification because the currently available credential formats “stop short of enabling unlinkability,” the independent cryptographer explained last month during the PGP* for Crypto breakfast meeting in Washington, DC. “What this means is that even if we do not disclose the plaintext value of our credential, we allow the verifier…to identify us across multiple presentations, and link multiple presentations to the same person.”

Ying Tong is one of the lead contributors to OpenAC, an Ethereum Foundation-led project to design a new format for so-called anonymous credentials, which are meant to be a privacy-preserving alternative. The group published a paper describing the technical details in November. The work, which uses zero-knowledge proofs, follows similar work by Google last year (which we talked about at the DC Privacy Summit in October). Just as important as the technical work is helping regulators, policymakers, and standards bodies understand how the capabilities may align with their needs, Ying Tong said, adding that much of the academic work falls short in this specific regard. That may help explain the problem with the EU’s digital ID program, which she and other cryptographers have criticized as being out of step with state of the art technical capabilities for privacy.

Ready to show your ID to use an app store? No? We’ve got good news and bad news. First the good: a federal judge in Texas blocked a law in that state that would have required app stores to verify users’ ages before letting them download apps. The bad news is this fight isn’t over, and it seems likely to reach the Supreme Court. Just so we’re all tracking: The Texas law is similar to others in Utah and Louisiana. Meta and X like this approach because it makes the app stores, not the app makers, responsible. Apple has pushed back and Google has backed a different approach, passed in California, which requires desktop and mobile operating systems to record an account-holder’s age and share that info as needed. Separately, in June of last year, the Supreme Court ruled in support of a different Texas law requiring adult websites to age-gate their content. The Verge has a good, longer write-up of all this.

ICE has a $636,500 contract with a company that makes AI agent bounty hunters. Do you know what skip tracing is? 404 Media has got you covered: ”The practice involves ICE paying bounty hunters to use digital tools and physically stalk immigrants to verify their addresses, then report that information to ICE so the agency can act.” Now there’s an AI agent for that, and the company behind it, AI Solutions 87, claims it can “deliver rapid acceleration in finding persons of interest and mapping their entire network,” including their “services, locations, friends, family, and associates,” according to 404. The contract is for “nationwide” skip tracing services for ICE’s Enforcement and Removal Operations division, which handles deportations, 404 reports based on public procurement records.

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Anthropic made an AI agent that discovered real zero-day blockchain bugs. The company had already demonstrated how its technology can be used to find cyberattack vectors in code. Same goes for blockchains, apparently. Last month, Anthropic researchers published a report describing investigations into the abilities of AI agents to exploit smart contracts. The researchers—who are quick to point out that they only tested exploits in blockchain simulators, not the real chains—ran a number of experiments using various benchmarks and blockchain datasets. Perhaps the most compelling test involved nearly 3,000 recently deployed smart contracts on Binance Smart Chain, none of which had known vulnerabilities before the test. The agent found two critical bugs. In neither case could Anthropic reach the contract’s developers. In one case, the researchers were able to coordinate with the Security Alliance (SEAL) and a white hat hacker rescued the vulnerable funds. In the other case, a real attacker exploited the bug four days after the agent discovered it and made off with $1,000.

The creator of Signal has built a product that lets you chat with an LLM in private. Moxie Marlinspike, who’s role in building end-to-end encryption into chat software made him a bit of a legend, is back. His new creation, Confer, lets you chat with an AI without divulging the contents of your conversation. Why is this necessary? As he writes in a blog post introducing the project:

“We are using LLMs for the kind of unfiltered thinking that we might do in a private journal—except this journal is an API endpoint. An API endpoint to a data lake specifically designed to extract meaning and context. We are shown a conversational interface with an assistant, but if it were an honest representation, it would be a group chat with all the OpenAI executives and employees, their business partners/service providers, the hackers who will compromise that plaintext data, the future advertisers who will almost certainly emerge, and the lawyers and governments who will subpoena access.

As Marlinspike explains in a second post, Confer uses a tool called passkeys to encrypt a user’s chat history with cryptographic keys that never leave their device. And in a third post, he explains how Confer uses trusted execution environments (TEEs)—isolated hardware that allows programs to run privately—to keep chat data secret from the team behind Confer, which owns the servers that process user prompts and generate responses.

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How “cryptographic thinking” can help evaluate AI safety. Cryptographers studying LLM content filters have discovered some interesting flaws in these systems. For technical details, read this Quanta story, which explains how recent research has shown that “the defensive filters put around powerful language models can be subverted by well-studied cryptographic tools.” Yay science, but what especially drew us to the piece was the name Shafi Goldwasser.

Goldwasser and Silvio Micali are credited as the inventors of zero-knowledge cryptography in the 1980s. Now a professor at the University of California, Berkeley as well as MIT, one thing Goldwasser is studying is the security of LLM content filters, tools designed to reject problematic prompts like: “How do I build a bomb?”

According to Quanta, Goldwasser’s team has identified a disparity between the processing capabilities of an LLM filter and those of the model itself that can be exploited using cryptographic tools. For example, the article describes how researchers recently used a simple cryptographic puzzle to sneak an off-limits prompt past the filters on name-brand LLMs. The filter wasn’t powerful enough to decode the puzzle so it let it through to the model. The model then decoded the puzzle and responded to the forbidden prompt.

Tether is no bit player in Venezuela. Who says crypto doesn’t have a use case? These paragraphs from a Wall Street Journal piece on Tether’s substantial footprint in Venezuela stood out:

Faced with escalating U.S. sanctions in 2020, Venezuela’s state-run oil company, Petróleos de Venezuela, or PdVSA, began demanding payments in tether to bypass the traditional banking system. Oil-export payments were settled through direct tether transfers to a certain wallet address or through intermediaries swapping cash proceeds for tether.

The shift was transformative for the country’s oil economy. By one estimate, almost 80% of Venezuela’s oil revenue is collected in stablecoins like tether, a local economist, Asdrúbal Oliveros, said on a recent podcast.

Also, these:

Mauricio Di Bartolomeo, a crypto entrepreneur born and raised in Venezuela, said his 71-year-old aunt called him two months ago because she needed to get tether to pay for the homeowners association fees for her condo.

“It’s how you pay your landscaper and how you pay for your haircut. You can use tether basically for anything,” said Di Bartolomeo, the co-founder of the crypto lender Ledn. “Stablecoin adoption has gone so far into Venezuela that even without having regulated venues where you can buy and sell them, people still choose to go for stablecoins as opposed to using the local banks.”

According to the article, America’s arrest and removal of Nicolás Maduro “is unlikely to diminish Tether’s presence” in the country. Oh, and also, Tether is cooperating with US authorities and has frozen dozens of wallets linked to Venezuela’s oil trade.

North Korea’s state-sponsored cyberthieves are raking it in. The DPRK stole more than $2 billion in 2025, shattering its own previous record, according to Chainalysis. Much of that came via the $1.5 billion Bybit hack last February. The report from Chainalysis estimates that the “lower-bound cumulative estimate” of funds stolen by DPRK is $6.75 billion. It also notes that the operation has expanded the playbook by relying more on “IT worker infiltration at exchanges, custodians, and web3 firms.” (Samczsun of SEAL and Casey Golden of Zeroshadow discussed this issue at the DC Privacy Summit in October.) It’s not just crypto firms they are targeting. Amazon has “found and foiled” more than 1,800 attempts by North Koreans to land jobs, according to Bloomberg, which reports that recently the company caught a North Korean who had just joined as an IT worker by detecting a millisecond-scale lag in their keystrokes.

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Hanging out with the neo-cypherpunks

By Lucy Harley-McKeown

On a blustery Sunday morning in November, I found myself in a nightclub in Buenos Aires called Deseo. Well-known for hosting frenetic electronica shows, I was there for a more sedate but potentially just as subversive gathering: the Cypherpunk Congress, a prelude to Ethereum’s flagship conference Devconnect.

As black-t-shirted coders and crypto fanatics queued to get in, volunteers were hurriedly setting up inside, plastering posters on the wall: “PRIVACY IS A CELEBRATION,” read one of them. “BREAKING TRIBALISM,” read another. “PRIVACY UNITED.”

But one poster, with the heading “Neo-cypherpunk Manifesto,” stood out. What in the world is a neo-cypherpunk? As I would learn throughout the day, the term is part of a blockchain-themed attempt to reboot a decades-old idea about privacy, human rights, and technology.

The congress’s organizers hope that, in time, it will be an evolution of the roadmap for programmers set out in 1993 in Eric Hughes’ A Cypherpunk’s Manifesto. Hughes’ original essay, often cited by cryptocurrency enthusiasts, argued that privacy is essential for an open society in the digital age. Cryptographers who identified as cypherpunks were instrumental in creating private, secure, censorship-resistant communications tools and systems. These included the development of the foundations for public key cryptography, which is used by platforms like WhatsApp to keep messages private, as well as the code that became the basis for transport layer security (TLS), which keeps things like emails safe from viewers other than the intended recipients. Cypherpunks also set up bespoke systems like their own email servers and private infrastructure for communicating via mailing list. It was part of an ethos that any compromises on privacy constitute dangerous steps toward handing control of digital systems to powerful companies and governments, which are likely to use them for profit, censorship, and oppression.

This worldview was the primordial soup from which cryptocurrency emerged. Cypherpunks long desired their own digital money system separate from centralized control. Bitcoin achieved this, but it also came with its own privacy problem: the ledgers at the heart of Bitcoin and Ethereum broadcast every transaction to the public, making it possible to identify users and follow the money.

In cypherpunk form, crypto developers attacked this problem with new technology, first with Zcash, which can use zero-knowledge proofs to keep transaction data secret. Then came Tornado Cash, which uses similar technology and runs on Ethereum. Things took a dark turn, however, when North Korean state-sponsored hackers started using Tornado Cash. Two of the protocol’s developers have been sentenced to prison as a result.

The fear of prosecution has demoralized the developers of blockchain privacy tools and chilled development. The events have also reinforced a wide-reaching perception outside of the crypto bubble that blockchains are mostly used by criminals.

Behind the term neo-cypherpunk is the idea that these unfortunate circumstances do not necessarily represent a dead end. Instead of “doom’n’gloom” neo-cypherpunks are “joy-centric,” the manifesto poster read.

The pitch was to “re-boot [the] cypherpunk narrative: refresh it from ‘founding fathers bias’” but also to “accept reality,” organizer and representative of crypto education nonprofit Web3 Privacy Now, Mykola Siusko said. The event aimed to help figure out how to move beyond ideological purity in order to make the values of the original cypherpunks more malleable and “acceptable to newcomers.” The reframing was in service of building digital systems that work better for everyone. Instead of “individual,” as the original cypherpunks may have been in the early days of the internet, the new movement is “communal.”

But the crowd was full of people who have first-hand experience with the kind of optimism implicit in Hughes’s ideas curdling into wariness and distrust of the powerful institutions that oversee modern digital life. To inspire actual change, the trick was going to be doing something that crypto has largely, so far, not achieved itself: to go beyond its own echo chamber and make the case that some of these tools are useful beyond speculation and, well, crime.

The freedom to NOT swim in a dirty lake

Few embody this mindset shift better than Ameen Soleimani. The Ethereum OG has been supportive of Tornado Cash since before it was built, and has been among the most vocal advocates for developers Roman Storm and Alexey Pertsev amid their prosecutions in the US and the Netherlands, respectively. Currently the CTO and founder of 0xbow, which uses zero-knowledge cryptography to achieve both privacy and legal compliance, Soleimani explained what 0xbow is building with a metaphor.

Imagine swimming in a pure, clear Patagonian lake, he said on stage. The lake is a digital space that you might like to spend time in, like a blockchain where you can transact freely and privately with others. The problem is that bad actors—including really bad actors like North Korea’s Lazarus Group—love privacy too. In Soleimani’s metaphor, Lazarus and others who take advantage of private blockchains to launder stolen funds are dumping rubbish in the lake. Anyone who keeps swimming in it gets covered in muck, and innocent people become guilty by association.

0xBow’s flagship product, Privacy Pools, is meant to keep the waters clean. The protocol uses zero-knowledge proofs to allow people to anonymize their transactions while so-called association set providers (ASPs) maintain a list of legitimate addresses that are allowed to participate in the pool, thus filtering out unwelcome actors before they’ve had a chance to participate.

The product’s inception was a response to the plight of the Tornado Cash developers. “Terrorism is, unfortunately, real,” Soleimani said, but “developers should not be held liable for the crimes of their users.”

Privacy Pools asks for a compromise: prove your funds come from a legitimate source, and you can add them to a pool that enables private financial transactions. In theory, everyone in the pool has been vetted to make sure neither they nor their money has been associated with any shady dealing.

For some cypherpunks, this idea is heresy. Any hint of attestations or proofs feels like a slide toward having to ask a centralized entity for permission. But the alternative is insisting that everyone swim in a polluted pool and risk being associated with the rubbish, Soleimani argued. You can’t demand freedom while refusing to deal with the consequences of how others use the same tools, he said. “I don’t want to be in the same association set as terrorists.”

Deciding who is a good guy and who is a bad guy is far from that straightforward, and there’s no denying this is the sort of thing cypherpunk tools—including cryptocurrency—were invented to help bypass. But Soleimani’s larger argument has to be confronted as well: treating any compromise as betrayal pressures people to cling to tools that offer fully private transactions but wouldn’t survive a regulatory or legal stress test, and might mean unsuspecting developers end up behind bars.

As such, Soleimani wants to give users a new kind of freedom: to swim in clean water and to disassociate from polluters.

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Money for nothing?

There was more than one source of tension in the nightclub that Sunday. Hughes’s manifesto advocated for “anonymous transaction systems” for the internet as a whole. But the jury is still out as to whether blockchains will demonstrate they have a true utility beyond facilitating finance and profit-making.

Ethereum co-creator Vitalik Buterin has long been conscious of this. In 2023, Buterin published an essay entitled “Make Ethereum Cypherpunk Again.” He argued that Ethereum was always meant to be cypherpunk—open digital infrastructure to be used not just for payments, but as a “shared hard drive” for the internet that anyone could use. At the time, he argued the project had, in part, lost its way. With the DeFi boom and the advent of NFT trading culture, demand for speculative financial investments had taken over the network.

Buterin wore large, dark sunglasses as he addressed the Cypherpunk Congress. After a brief pitch for the new Kohaku framework—a suite of tools the Ethereum Foundation has built to help developers integrate privacy into crypto wallets—he sat down for a fireside chat about why the Ethereum community is so focused on privacy right now.

“[There are] barriers we’ve taken for granted—that conversations are private and money is private—each one of those is being eroded,” he said. Blockchains are arguably cypherpunk tools in that they can protect against financial surveillance by the state or other powerful groups—especially when they are paired with privacy tools like zero-knowledge proofs.

Buterin wants to be able to demonstrate that Ethereum can be useful for more than just crypto finance—for crucial things like protecting people from AI-powered mass surveillance. This would strengthen the argument that it could act as a more private (and more cypherpunk) backbone for the internet.

Tor founder Roger Dingledine remains skeptical. On the day of the congress, I ran into him on the mezzanine overlooking the main stage. When asked what he thought of the potential for crypto as a cypherpunk tool, he expressed doubt about its potential due to how its users are incentivized.

As he has repeatedly argued in the past, adding the incentive to profit from a crypto-token, or take lots of venture capital funding, could undermine Tor’s mission. His aim is to build products that keep people safe—not generate profit, he told Buterin during a fireside at a separate event the following week. At last year’s Cypherpunk Congress, he said Tor has avoided adding a crypto token “because you’d be swapping out altruism for capitalism as a building block.” Tor’s network is built through volunteer-run servers, which hide a user’s traffic through randomization loops. Dingledine says if there were a token reward to incentivize running a server, people would inevitably try to game the system. Tor runs automated checks on whether the server has the technical abilities to run a relay—if there were some way to trick the automation, it could lead to an unfair allocation of token rewards.

“I come from the free software community and the cypherpunk community, not the Silicon Valley startup world,” Dingledine said to Buterin. “We don’t have venture capital people—our goal is to build a tool that actually keeps users safe, in whatever situation they’re in. Because we’re in non-profit land we can afford to make those choices,” he said.

Buterin pushed back on the idea that a financial incentive is always a bad thing, even while he conceded that Ethereum has become a place where financial speculation is rife. “Capitalism in crypto is the ultimate double-edged sword,” Buterin said. While huge institutions with lots of money “make the numbers go up,” if that kind of investment had never happened “we would not have had the funding to develop [things like] zero-knowledge proofs,” he said.

While the power of the original cypherpunk movement lay in part in its uncompromising stance, by the end of the day, I had come to understand neo-cypherpunkism as a mantra that values the middle ground. From Soleimani’s protected lake to Buterin’s nod at market economics, both had shown that the development of new privacy tools come with trade-offs. And while crypto grapples with its image problem, these choices have the potential to make privacy accessible beyond the walls of an underground club—with a higher chance of converting the masses.

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The speed of technological evolution is causing familiar systems—from government to finance to journalism—to glitch. The resulting noise makes it tough to connect the dots. We hope this digest helps.

The EU watered down “chat control.” Privacy advocates still hate it. European governments have agreed to advance the controversial Regulation to Prevent and Combat Child Sexual Abuse, known to its critics as “chat control.” The proposal originally mandated that messaging application providers—including encrypted messaging providers like Signal—automatically scan content before it leaves a sender’s device for evidence of child sexual abuse. Privacy advocates and cryptographers warn that this sort of “client-side” scanning system would be a dangerous backdoor that the government could easily abuse. Denmark, currently the President of the Council of the EU, recently modified the text after failing to garner enough support for mandatory scanning. Now the proposal calls for “voluntary” scanning instead—and is on track to be finalized in April.

Some privacy advocates called the new language a Trojan Horse. Patrick Breyer, a digital rights activist and former member of the European Parliament representing the German Pirate Party, told TechRadar the policy is a “disaster waiting to happen.” Said Breyer: “By cementing ‘voluntary’ mass scanning, they are legitimizing the warrantless, error-prone mass surveillance of millions of Europeans by US corporations.”

AI companies are “taking a cue” from the crypto industry on election spending. That’s according to the New York Times, which has an interesting recent report on a plan to raise $50 million for a “new network of super PACs that would back midterm candidates in both parties who prioritize AI regulations.” The effort, which apparently involves employees at Anthropic and “allied donors loosely tied to the effective altruism movement,” is explicitly a counter to Leading the Future, a group that has raised $100 million combined from Andreessen Horowitz and the family of OpenAI co-founder Greg Brockman.

AI industry money is almost guaranteed to pour into politics this cycle, just like crypto industry money did in 2024. But as the Times notes, unlike the crypto industry, the AI industry “is not rowing in one direction politically.” Whereas the Leading the Future side has been largely critical of AI safety regulation, Anthropic’s leaders are known for their public warnings about the possible dangers of AI. For example, Anthropic recently went to the Wall Street Journal with the information that Chinese hackers used its technology to “automate break-ins of major corporations and foreign governments during a September hacking campaign.”

Aztec’s zero-knowledge sanctions check shows what ZK can do for AML. Token sales require sanctions checks. Aztec’s recent token sale gave buyers the option to use ZKPassport, a service that uses zero-knowledge proofs to let people anonymously prove they were over 18, not on a sanctions list, and not from a list of countries banned from participating in the sale for various regulatory reasons. The application demonstrates how zero-knowledge proofs could be used to achieve anti-money laundering goals without collecting personal information from users. We talked about this all day long at the DC Privacy Summit in October.

There’s an important caveat, as Ariel Gabizon, chief scientist at Aztec, clarified on Twitter: The process records a hash of the user’s passport chip data on the blockchain, a “unique identifier needed to ensure one person doesn’t participate in the sale multiple times and purchase tokens beyond the regulatory allowed limit,” he said. That means it’s possible for anyone who also has your passport chip data, starting with the government that issued the credential, to check if the user participated in the token sale. As ZKPassport explains here, the team is working on a new approach that would prevent this.

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Betting on the war in Ukraine got ugly. The perverse beauty of the term “degen” is that there’s no bottom to it. Anyway, people are using the prediction market Polymarket to wager on battles in Ukraine. In one specific market, gamblers had been betting on whether Russia would capture a city called Myrnohrad by the middle of November. According to a report from 404 Media, just before the clock ran out on that bet, an edit appeared on the market’s agreed-upon source, a map maintained by the Institute for the Study of War, a Washington, DC-based think tank, showing that Russia had captured the city. The Polymarket bet paid the supposed winners. But then the map was edited once more, and Russia no longer controlled the city, according to 404. “It has come to ISW’s attention that an unauthorized and unapproved edit to the interactive map of Russia’s invasion of Ukraine was made on the night of November 15-16, EST,” ISW said in a statement on its website. “The unauthorized edit was removed before the day’s normal workflow began on November 16,” it added.

When 404 asked ISW about the Polymarket betting, the group didn’t hold back: “ISW has become aware that some organizations and individuals are promoting betting on the course of the war in Ukraine and that ISW’s maps are being used to adjudicate that betting. ISW strongly disapproves of such activities and strenuously objects to the use of our maps for such purposes, for which we emphatically do not give consent.”

Crypto exchanges Binance and OKX appear to have helped transnational criminal hacking groups move millions in illicit funds. One of the main characters in this story is the Huione Group, a Cambodian financial conglomerate that also runs a shady digital marketplace likened to “Amazon for criminals.” In May, the US moved to ban the group from its financial system. “Huione Group serves as a critical node for laundering proceeds of cyber heists carried out by the Democratic People’s Republic of Korea, and for transnational criminal organizations in Southeast Asia perpetrating convertible virtual currency investment scams, commonly known as ‘pig butchering’ scams, as well as other types of CVC-related scams,” the US Treasury Department’s Financial Crimes Enforcement Network said at the time. Nonetheless, hundreds of millions of dollars flowed from Huione to crypto exchanges Binance and OKX during the first half of this year— including after the US had branded it a criminal organization, according to a new investigation from the International Consortium of Investigative Journalists.

Binance also seems to have allowed North Korean hackers to use its service in the aftermath of the $1.5 billion hack of another crypto exchange, Bybit, in February. A crypto analytics firm called ChainArgos told the New York Times that a handful of Binance accounts received $900 million in Ether from the same service the hackers were using to swap stolen Ether for Bitcoin. The stolen money was “the only conceivable source for these outflows,” ChainArgos CEO Jonathan Reiter told the Times. “Even a bad–maybe even defective—screening tool would spot that.”

AI will change voters’ minds. It doesn’t have to be a disaster for democracy. Research published last week in Nature and Science outlined how AI chatbots programmed to persuade people in the US, Canada, Poland, and the UK to vote for specific political candidates were far more effective than standard political advertising. On its own, this shouldn’t be too surprising; an “I’m so-and-so and I approve this message” ad stumping for a candidate is a lot easier to dismiss than a chatbot that answers questions with a coherent-sounding argument. But one interesting wrinkle of the research was that it showed the bots became more persuasive when they served up more misinformation.

A lot of coverage around the research assessed whether it proved that chatbots were destined to hasten the decline of democracy by way of rotting voters’ brains. The answer to that is: yeah, probably. But it’s not a foregone conclusion. There are plenty of timelines still available to us in which governments step in and pass laws that restrict the use of AI during elections. To some extent it’s already happening—as MIT Technology Review reports, the EU’s AI Act classifies AI tools of political persuasion as “high risk” and curtails their use. Unfortunately in the US, where the federal government has been hostile to AI regulation, election watchdogs are forced to operate using outdated laws about what constitutes election “fraud”. There’s still time to get a handle on the situation, though that will require meaningful regulatory action.

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We probably can’t stop the privacy disaster that’s coming. But we may be able to contain it.

By Mike Orcutt

We’ve hit a fork in the road. One way leads to dystopia, panopticon, an AI-powered surveillance state that can all but read your thoughts. In the other direction lies a treacherous technical and legal obstacle course that, if successfully navigated, results in reliable, safe, and easy-to-use cryptographic tools that can protect people from state and corporate surveillance.

Whether and to what extent that protective infrastructure gets built will hinge on communication and shared purpose among software developers, law enforcement, and policymakers—groups that don’t always get along.

The clock is ticking. Age verification laws, digitized ID credentials, and stablecoins are coming. As a society, we have a choice to make: Will these new digital facets of our lives be privacy-preserving, or privacy nightmares?

This was the central question that we wrestled with in October at the second annual DC Privacy Summit. It’s taken me a little while to go back over all the thought-provoking content and really hear how that deeper message came through. Here are a few reflections from the event that I think are worth keeping in mind as we make our way through this pivotal technological moment.

Mountains of dry timber, ready to burn

“Things are going to get really, really bad, and they are going to do this in a hurry,” Johns Hopkins computer science professor Matthew Green warned during his keynote talk. Green, who is renowned for his work in cryptography and his insights on data privacy, calls what’s about to happen a privacy forest fire.

A forest fire needs a few ingredients, starting with fuel. “If the fuel is already dry and just sitting there, that’s even better,” Green said. In his analogy, the dry fuel is the vast amount of data that technology companies and governments collect and store in centralized databases.

Next comes the accelerant, which will spread the fire like a strong wind. Green said this has two components. The first is weakening encryption.

In the European Union, some policymakers are pushing a policy that has become known as “chat control.” Officially called the Regulation to Prevent and Combat Child Sexual Abuse, the proposal originally mandated that messaging application providers, including encrypted messaging providers like Signal, automatically scan content—before it leaves a sender’s device—for evidence of child sexual abuse. Privacy advocates and cryptographers, including Green, warn that this sort of “client-side” scanning system would be a dangerous back door that the government could easily abuse. Denmark, currently the President of the Council of the EU, recently modified the text of the regulation after failing to garner enough support for mandatory scanning. The proposal now calls for “voluntary” scanning instead. It’s on track to be finalized in April.

Another example is in the United Kingdom, where earlier this year the government ordered Apple to create a back door that would provide access to any encrypted user data stored in the cloud, globally. After Apple stopped offering its encrypted cloud service, called Advanced Data Protection, in the UK, and the Trump administration criticized the policy, the government dropped its demand for global access. But in October, it issued a new, more focused demand for access to British users’ encrypted data.

And then there’s the war against private cryptocurrency. The EU is cracking down on privacy coins like Zcash, and the US has prosecuted developers of crypto privacy tools.

The second component of the accelerant in Green’s analogy is more subtle: “In the future, everything we do online is going to be tightly bound to our identity,” he said. This shift is already underway, thanks to laws cropping up that mandate many kinds of websites verify that their users are over a certain age. “At some point in the near future, that tightly bound human identity on your phone is going to be used for stuff you do online,” Green warned. “And that human ID is a legible government ID,” meaning your government could theoretically see everything you’ve done online.

The final forest fire ingredient is powerful AI. “In the past, we have survived all of this data collection because we’ve had limited human capacity to process data,” Green said. “That’s not a problem anymore.”

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The forest for the trees

You may prefer a different disaster metaphor. But the notion that we need new ways to protect ourselves from massive, AI-assisted surveillance should not be controversial. Unfortunately, this conversation is stuck at an impasse. It’s plausible that we could deploy some of the astounding practical cryptographic capabilities that have emerged in the last half-decade toward that protection. But these technologies have developed a bad reputation with many policy and law enforcement types right out of the gate.

Take zero-knowledge cryptography, which makes it possible to prove statements about yourself, like your national citizenship or that you are over 18, without revealing other information. Unfortunately, the most attention it has received outside of a relatively small community of cryptographers and enthusiasts was thanks to a massive cryptocurrency heist carried out by a band of North Korean state-sponsored hackers raising funds for the nation’s nuclear weapons program.

The Lazarus Group, as it’s called, stole $600 million in 2022, then turned to Tornado Cash, a zero-knowledge cryptography-based privacy tool on the Ethereum blockchain, to throw law enforcement off its tracks. That has led to the criminal conviction of two of Tornado Cash’s developers, Alexey Pertsev and Roman Storm.

The episode, combined with the technical complexity at play, has made it easy for regular people to miss that the underlying technology could be used as protection against the overcollection of personal data. If you need evidence, look no further than Google Wallet. Google has incorporated zero-knowledge proofs to create anonymous credentials, which can be used to prove the veracity of information on a driver’s license or passport, like someone’s age, gender, or nationality, without revealing any other personal data.

Abhi Shelat, a Northeastern University computer science professor who helped develop Google’s zero-knowledge credentials, argued at the DC Privacy Summit that zero-knowledge cryptography is ready for mainstream adoption. “It works on a phone; it works on a blockchain,” he said. “I wouldn’t say there’s a real technical bottleneck to deploying this.”

Few understand this

Instead, Shelat said, the major bottleneck to deployment may be how few people understand the technology well enough to reckon with the novel questions it raises.

For example, law enforcement agencies are accustomed to collecting and storing detailed data about financial transactions. If advanced cryptographic tools are used to keep that information secret, how will those agencies do their job? On the other hand, could such tools be designed to make it easier to prevent financial crime?

More specifically, could the crypto industry find better ways to stop the Lazarus Group from using cryptocurrency to help fund its nuclear weapons program? “Onchain privacy is like nuclear physics,” Wei Dai, a cryptographer and research partner at the venture capital firm 1kx, argued at the Privacy Summit. “It is a dual-use technology that can do great good for the world, but also can be very dangerous.”

Neha Narula, director of MIT’s Digital Currency Initiative, said that while zero-knowledge proofs are “uniquely powerful,” it’s important not to gloss over the potential downsides if they and other powerful privacy tools gain wide adoption.

“Imagine a world where producing cryptographic proofs is easy and automatic, and so asking for proofs becomes routine,” she said. “You need to prove you are credit-worthy to use a ridesharing app, or you need to prove your health status in order to enter a building.” People end up with less autonomy, not more. “A technology that was originally designed to help with privacy turns into continuous permissioning,” she imagined.

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A chance to show the world

In the near term, given the national security concern, the lack of clarity as to how these tools fit into the law, and the technology’s rapid evolution, the legal conflict over these technologies seems likely to keep festering.

On the other hand, recent policy developments—age verification laws, government-backed digital IDs, and America’s new stablecoin law, to be specific—may force the issue in a way that makes a resolution more plausible.

The industry should jump at the chance to demonstrate its powerful cryptographic technologies, Peter Van Valkenburgh, executive director of the blockchain policy advocacy and research group Coin Center, argued at the Privacy Summit.

In the US, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act has cleared the way for more traditional financial institutions to start using stablecoins. That may be a business opportunity for crypto companies, but it also raises urgent questions about privacy. “The current stablecoin model of recording all user payment transactions on a public blockchain is actually worse for personal privacy than the traditional banking system,” he said. It’s in this context that Coin Center is advocating for “a fundamental rethink of digital identity in the United States.”

America’s current anti-money laundering (AML) regime operates under a law called the Bank Secrecy Act, which was passed in 1970. The antiquated system is costly, blocks only a small percentage of criminal funds, and gives the government the power to “weaponize” our payments data as a means of control, Van Valkenburgh said at the Privacy Summit. Blockchains, along with portable digital ID credentials, zero-knowledge proofs, and cryptographic tools, can be used to build alternative, more effective, and much less invasive AML systems, he said.

There’s a lot that still needs to be figured out, though. For one thing, proving individual, static statements about yourself is a long way from replacing traditional AML systems. “None of the history of computer attack and defense or anti-money laundering is a static system,” Ian Miers, another Zcash co-inventor and a computer science professor at the University of Maryland, said later in the day. “You have to be able to react and adapt because any given tactic you pick, they’re going to adapt their tactics, techniques, and procedures to get around it.” Miers argued that what’s needed are systems capable of automatically determining “dynamic risk scores” for potential users while still maintaining user privacy.

Miers and Van Valkenburgh recently authored a paper calling on crypto privacy projects to coordinate amongst themselves and with civil liberties advocates to design and test safe, alternative AML systems. To start, an industry consortium “could develop open standards for decentralized, maximally privacy-preserving identity credential architecture and urge Congress and regulators to authorize regulated providers to rely on them,” they wrote.

A race against time

Something like that would have implications beyond crypto and anti-money laundering, particularly if governments keep pursuing “identity-binding mandates,” as Green calls them.

We should resist policies that tie government identities to online activity, Green said. “At very least, we have to make sure that any identity-binding mandate we add to everything is done in a privacy-preserving way.” That will tee up another fight, he said: “Is it fully privacy-preserving or is it privacy-preserving with a warrant exception? We haven’t even begun that discussion, which is terrifying, because these laws are being passed right now.”

We should also ban companies from retaining the data they used to verify identity credentials, Green argued. Otherwise, a market will arise for it. “It’s not privacy-preserving, they will log it, and they will log your identity with every single thing you do, and that data’s going to be incredibly valuable.”

Finally, while anonymous credentials work, they create new challenges when it comes to the sort of fraud and abuse that commonly occurs online. “I would love to tell you that all we have to do is replace cookies with zero-knowledge proofs and we’re done,” Green said. “But what happens when someone takes my key or my driver’s license credentials off my phone and copies them onto 10,000 phones that are all bots? Which is what they’re gonna do.”

Today, if Google sees the same cookie coming in from too many IP addresses, it can tell you’ve been hacked. “If I’m anonymous—if I’m a zero-knowledge proof—they can’t do that,” he said. He called this a “huge technical barrier” to the real-world use of anonymous credentials. “I’d love to tell you that the academic world has fixed this. Nobody’s fixed this.”

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The speed of technological evolution is causing familiar systems—from government to finance to journalism—to glitch. The resulting noise makes it tough to connect the dots. We hope this digest helps.

A developer of a Bitcoin privacy tool was sentenced to five years in prison. In July, Keonne Rodriguez pleaded guilty to operating an unlicensed money transmitting business. They did so under a section of the US criminal code that the Department of Justice has interpreted to mean that if one “knowingly” facilitates the transfer of criminal funds, they can be charged with operating an unlicensed money transmitting business—even if what’s actually facilitating the transfer is software that never takes control of user funds. (We’ve been documenting this confusing interpretation, which is also the basis for the prosecution of Tornado Cash developer Roman Storm, all year.)

Rodriguez, whose lawyers had requested a sentence of one year and one day, submitted a letter appealing for leniency from Judge Denise Cote of the Southern District of New York. But Cote “appeared extremely skeptical of any claim to Samourai Wallet’s usefulness for non-criminal ends or general privacy,” David Z. Morris reported for The Rage. Rodriguez’s co-developer, William Lonergan Hill, is scheduled to be sentenced next week.

Are the words of an AI chatbot “speech”? The family of a 14-year-old who committed suicide has brought a wrongful death and negligence lawsuit against Character.AI, the firm behind a chatbot with which the teen had developed a romantic relationship. The factors here are sensitive and complex, and we recommend reading the comprehensive The New York Times Magazine piece on it. One thing that immediately stands out, though, is Character.AI’s defense. As the piece explains:

This kind of negligence suit comes into U.S. courtrooms every day. But Character.AI is advancing a novel defense in response. The company argues that the words produced by its chatbots are speech, like a poem, song or video game. And because they are speech, they are protected by the First Amendment. You can’t win a negligence case against a speaker for exercising their First Amendment rights.

According to the NYT Mag (citing Helen Norton, a law professor at the University of Colorado), this is “very likely the first time the courts have confronted a ‘nonhuman speaker’ in a wrongful death case.” But it’s far from the last. “These disputes are going to come fast and furious as AI capabilities evolve,” Norton said.

Fake people fanned the flames of online outrage following Cracker Barrel’s logo change. A company that Cracker Barrel hired to analyze social media posts found that “32% to 37% of the online activity criticizing Cracker Barrel in the days after its logo announcement was fueled by fake accounts,” the Wall Street Journal reports. The research did not determine the real people behind the fake ones. But according to the WSJ, the bots amplified a number of X posts from the holdings of one investor in Cracker Barrel named Sardar Biglari, who also owns Steak ‘n Shake and the media brand Maxim. Biglari denied involvement, telling the WSJ that the bot story is just part of a “roulette wheel of excuses” from Cracker Barrel.

What’s in your (agent’s) wallet? If little AIs are going to run around the internet carrying out their masters’ orders, they’re not going to get far unless they can buy stuff. The question is, how are agent payments going to work? Back in September, crypto exchange Coinbase and Cloudflare, the web content delivery services company, announced they’d teamed up to start trying to answer that question with the x402 protocol. The idea behind x402 is to create a way for agents to be able to request an item of value—whether that’s the latest Shein fit, a new bunch of inference tokens, or whatever—from an online seller, get a “402: Payment Required” response, and then be able to submit details to complete the transaction (the 402 response is already embedded in HTTP, similar to its more famous sibling, “404: Not Found”). The framework includes a cryptographic signature that proves the agent making the purchase has been authorized to use the resources necessary to complete the transaction.

Building on that idea, Coinbase released a tool late last month called Payments MCP that’s meant to allow AI agents to access cryptocurrency wallets. As the US’s largest crypto exchange and creator of the popular Ethereum Layer 2 Base, it’s pretty clear where Coinbase’s interests lie—legions of agents doing business onchain could be very good for business. But x402 isn’t being built to be crypto-specific; as Cloudflare’s blog post describing plans for x402 says, “Future versions of x402 could be agnostic of the payment rails, accommodating credit cards and bank accounts in addition to stablecoins.”

Of the $864 million the Trump Organization’s income in the first half of 2025, $802 million came from the family’s crypto businesses. That’s according to an investigation by Reuters. It’s also compared to just $51 million in revenue a year earlier. The report added that more than half of the Trumps’ income came from sales of World Liberty Financial tokens.

The crypto case that reduced jurors to tears might get a redo. Two brothers made $25 million in 12 seconds by exploiting Ethereum “MEV” bots. Was it a crime? Unclear—a federal prosecution ended in a mistrial last week after a jury was emotionally overwhelmed by the case.

Prosecutors have said they want another trial. If that happens, a fresh set of jurors will need to try and grasp the inner workings of the Ethereum network, specifically the process by which new transactions are added to blocks and published to the chain. There’s a lot of money to be made in this process, and this potential profit is called maximal extractable value, or MEV. Ethereum has a complicated system aimed at keeping the competition for this money fair. The game has three main players: 1. Searchers, who use bots to scan the queue of pending transactions for opportunities to make money by sequencing the transactions in specific ways. Searchers propose transaction bundles to 2. builders, who use them to build the most profitable blocks possible, and then offer a cut of the profit to 3. validators, which are responsible for adding new blocks to the chain.

The vast majority of validators use open source software called MEV-Boost, developed by Flashbots, to interact with builders. The two brothers, James and Anton Peraire-Bueno, operated validators. They had found a vulnerability in MEV-Boost that gave them more insight into the content of proposed blocks than the system is supposed to allow. With that insight, they changed a block’s transaction sequence in a way that, as explained in a postmortem published at the time by Flashbots, “effectively stole” money from a bot that had proposed the original sequence. The brothers were charged with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering. But the jury in their trial couldn’t reach a unanimous decision on the charges, and the judge declared a mistrial.

ICE and CBP agents are scanning people’s faces on the street to verify citizenship. That’s the headline from 404 Media, which reviewed multiple videos showing that the agencies are “actively using smartphone facial recognition technology in the field.”

Trusted execution environments (TEEs) maybe shouldn’t be so trusted. Researchers pulled off physical attacks on all three of the most popular confidential computing devices on the market. This one is technical as hell, but it matters because TEEs are so prevalent. The hardware, used in cloud computing, AI finance, defense, and even blockchain systems, is supposed to keep data and computations private, even from an attacker who has taken root-level control of the system. “It’s hard to overstate the reliance that entire industries have on three TEEs in particular: Confidential Compute from Nvidia, SEV-SNP from AMD, and SGX and TDX from Intel,” writes Dan Goodin of Ars Technica. That’s problematic, Goodin says, because researchers have now shown that all three can be broken via inexpensive physical attacks. He explains:

The low-cost, low-complexity attack works by placing a small piece of hardware between a single physical memory chip and the motherboard slot it plugs into. It also requires the attacker to compromise the operating system kernel. Once this three-minute attack is completed, Confidential Compute, SEV-SNP, and TDX/SDX can no longer be trusted.

The researchers behind the attacks, which they have collectively named TEE.fail, have published a paper and a website describing their work.

Our first major foray was a panel discussion that Michael Reilly moderated in Washington, DC, in September, featuring Art Abal of Vana and Jay Stanley of the ACLU. Today’s edition reflects on one particularly urgent idea that surfaced during that conversation. After that, we have a highlight from the DC Privacy Summit.

Who will own the training data?

By Mike Orcutt

Whether AI will be good or bad for society in the long run may hinge on how widely its power is distributed. Jay Stanley, a senior policy analyst at the American Civil Liberties Union, compares AI to weapons technologies that have changed the nature of warfare in the past: Will it be more like tanks or like muskets? Tanks are technically complicated and massively expensive. Only large, wealthy entities that command tremendous amounts of labor and industrial resources can produce them. That makes them “inherently authoritarian,” he says. By comparison, muskets, rifles, and other small arms are simple and easy to distribute widely—they’re “inherently democratic.”

At the moment, AI is more like tanks—primarily built and deployed by companies with vast amounts of capital and infrastructure at their disposal. As Stanley noted, however, the rise of models like DeepSeek R1 and its later iterations shows that cheaper, open-source models have the potential to change the playing field.

One factor that will weigh heavily on how things play out is who owns the data that these models use to train on.

“The power in AI is actually data now,” Art Abal, managing director of the Vana Foundation, said at Project Glitch’s session of PGP* for Crypto, a gathering of crypto policy insiders in Washington, DC. Abal joined remotely from Australia to chat with Stanley and Project Glitch editor Michael Reilly about what decentralization can do for AI.

“We’ve reached what’s called a data wall. All of the public data has already gone into a lot of these (large language models),” Abal said. Now all the valuable data lives in what he called “private data silos” owned by technology companies. “That’s essentially what we’re trying to break up in creating a decentralized protocol for data,” he said.

The company Abal cofounded, Vana, has devised a system that lets users privately store personal data—say, for example, all their Reddit data, which can be acquired by submitting a form—and control access to it using rules encoded in blockchain smart contracts. Vana has also created a mechanism by which users can pool their data to create valuable datasets they collectively own. There are 15 such “data collectives” listed on the company’s website. The most high-profile example is probably RedditDAO, which promises to let you “own your Reddit history.”

Stanley expressed skepticism about the business of helping people make money from their personal data because he’s seen so many failed attempts over the years, starting long before blockchains emerged. And it’s not clear how much room there is to improve large language models (LLMs) with additional data, at least “compared to the huge leap that we achieved by training LLMs on the whole Internet,” he argued.

But it’s not just about LLMs, Abal said. “We’ve also got to remember that the majority of the AI we interact with every day is not just LLMs,” he said. “We interact with it whenever we get suggested things, we interact with it whenever we go to the doctor’s, we interact with it in all sorts of facets of life.” That’s why data—and especially “niche data” like data on specific kinds of human interactions with AI—is so valuable, he said.

Indeed, the power that companies like OpenAI, Anthropic, Meta, Google, and others have in this realm—not just to build better LLMs but also other kinds of models—is increasing as they collect more and more of this data, he said. The quality of public datasets is improving, but “the majority of data that creates that edge in terms of AI is exchanged in these private backdoor deals or is trained on data that the platforms collect themselves.” This helps explain why Anthropic, which had previously said it would not rely on user data for model training, recently changed its policy and will now use that data by default, Abal said.

For many good reasons, not everyone will want to hand over their data. “There’s an enormous need for people to use models that have privacy, either personal privacy or just organizations that can’t share their documents,” said Stanley.

Users should also have the power to pack their data up and move from one platform to another, Abal argued. Without this kind of “data portability,” a “flywheel effect” will just keep increasing big AI companies’ power, he said, at the expense of users.

Take ChatGPT for example, he said: “It trains on your data, unless you opt out, so the more data you put in, the better the model gets, which increases your incentives to use that same model, which then increases the amount of data that you put in that model, which then makes that model better and increases your incentives to use that model.”

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PRIVACY SUMMIT INSIGHT

Zero-knowledge credentials are just step one

Many compelling themes emerged from the conversations at Project Glitch’s DC Privacy Summit last month. One that stood out was how much conceptual and technical work is still to come before a truly secure alternative to today’s anti-money laundering (AML) systems will be ready for prime time.

There are good reasons to want to supplant the current AML regime:

• It calls on financial institutions to collect and store vast amounts of personal data—a costly and arguably outdated practice that leaves regular people’s sensitive personal information vulnerable to hackers.

• The current system also doesn’t work for decentralized software, where there is no human in the middle to verify customer IDs and watch for suspicious transactions.

• We have powerful new cryptographic capabilities that could serve as components of these new AML systems.

Many of the Privacy Summit sessions touched on the idea that zero-knowledge cryptography could be used to anonymously prove statements about a user’s identity, from their national citizenship to the fact that they are older than 18 or 21 years. These tools are ready today; Google already is using them. But anti-money laundering systems require more than just static checks, noted Zcash co-inventor and University of Maryland cryptographer Ian Miers in one of the most insightful moments of an insight-packed day:

Watch the full panel discussion, which featured Miers as well as Ross Schulman of SpruceID and Laz Pieper of the DeFi Education Fund, here. And here’s a playlist of every session from the day.

Below, you’ll find a roundup that’ll catch up anyone who wasn’t able to attend. And to the large chunk of folks who were there and signed up for the newsletter, welcome! Consider this your Cliff’s Notes from the day.

Let’s get more precise about privacy

The story of cryptocurrency and privacy has mostly been the same since day one: as long as the public ledger is transparent, the money is traceable. As long as the money is traceable, the state (and possibly your adversaries) will trace it. To truly be a money system independent of state control, it must be both uncensorable and private. This is nothing new. Hence Zcash, Monero, Tornado Cash, Samourai Wallet, and more recent projects like Railgun and 0xbow—all of which use cryptographic techniques to achieve some level of privacy onchain.

Recently, however, the story has begun to change. The rise of shockingly powerful data processors like large language models, the overt aggregation of government databases to juice surveillance powers, and massive thefts of personal data by nation-state hackers are just a few of the reasons for that. More people, even in historically safe and stable places like the US, are looking to better protect their data.

Combine that with an administration in Washington positioned as “pro-crypto” and it helps explain why so many influential folks in crypto social media spaces have been posting so much about privacy lately. Not only is it timely, but the subject is no longer widely seen as taboo. (Coincidentally or not, the price of Zcash, the first practical implementation of zero-knowledge proofs, has also been pumping.)

But social media, especially crypto social media, is mostly noise.

To find the signal, you’ll have to dig beneath the shitpost-covered surface. Talk to the folks giving themselves headaches from thinking so hard about how to balance onchain privacy with the risks posed by bad actors. Ask the regulators who see the promise of emerging cryptographic privacy tools, but who also see first-hand how the world’s most sophisticated hackers use them to evade law enforcement. Push the conversation beyond the usual absolutism into a grey area full of technical possibilities and ideas, but devoid of concrete plans for how to move forward.

That’s what we did on October 16.

The 2nd Annual DC Privacy Summit highlighted the many facets that should comprise an urgent, pragmatic conversation about cryptographic privacy in 2025. Interested in participating in this conversation? We recommend you close Twitter for a while and immerse yourself in the Privacy Summit sessions we describe below, in the order in which they occurred on the day of the event.

Read the summaries. Watch the videos. Watch them again. And then let’s keep talking about privacy for real. The narrative on social media has nothing on this stuff.

You are probably underestimating modern cryptography. Arnaud Schenk, executive director of the Aztec Foundation, noted in his opening remarks that until recently, cryptographic tools were mostly binary—fully private or fully transparent. That’s no longer the case, he said. Tools incubated in the blockchain space over the past decade can achieve much greater flexibility. These tools will only get more powerful and easier to use, and they are bound to shake things up considerably, he said:

“By definition, they break a bunch of assumptions that I think a lot of regulators, a lot of companies, have about how the world works or ought to work. They give people new powers, and they create new risks. They will make some regs completely counterproductive, and they will make new regs potentially needed.”

(Watch Arnaud Schenk’s talk)

A privacy forest fire is coming. Johns Hopkins University cryptographer Matthew Green has a dire warning: that paranoid thought in the back of your mind that somewhere someone knows everything about you, right down to your individual Google searches, will not just be a paranoid thought for much longer. His preferred analogy is a forest fire:

• The dry timber is the vast amount of data that governments and companies have already collected and are now storing.

• The accelerant is the current push by governments to weaken encryption and bind human identities to online interactions using mobile driver’s licenses and other digital credentials. “In the past, we’ve survived all of this data collection because we had limited human capacity to process data,” Green said.

• That’s not the case anymore, due to the fire-starter, he argued: emerging capacities to do machine learning inference at massive scales.

It’s not all bad news; there are still things we can do to keep the whole forest from burning to the ground. But it’s late in the game. (Watch Matthew Green’s talk)

Technology is not a privacy cure-all. “When we talk about privacy today, the conversation inevitably quickly turns to technology,” Neha Narula, director of the MIT Media Lab’s Digital Currency Initiative, said in her keynote. But we need to be precise about what these technologies can and can’t do. Take zero-knowledge proofs:

“They let you show that a computation was carried out correctly, without revealing the underlying data, and that’s remarkable. But they don’t tell you if the data itself is accurate or complete, and they don’t preclude the need for an authority to source that data, like a government indicating citizenship. The mere use of verifiable credentials can’t prevent an authoritarian government from denying some of its citizens that credential. And it can’t stop a platform from using that credential to kick certain types of people off.”

Narula is also concerned that if used unwisely, zero-knowledge proofs and other tools could replace autonomy with, as she put it, “automated control.” Imagine having to prove you are credit-worthy before you can call an Uber, or prove your health status before being allowed into a building. “A technology that was originally designed to help with privacy turns into continuous permissioning.” Technology itself is not enough; technologists must figure out how to work within policy and the law, Narula said. (Watch Neha Narula’s talk)

Human dignity still matters. After her talk, Narula was joined on stage by SEC Commissioner Hester Peirce. They discussed a speech that Peirce gave in August that highlighted the promise of zero-knowledge proofs for achieving greater financial privacy. It’s significant that a regulator is talking about this stuff in such detail. But is it really possible to change entrenched mindsets in DC around anti-money-laundering and financial data collection?

If so, it will be by appealing to our shared dignity, Peirce said.

“We don’t want to become like the bad guys in the process of going after the bad guys, right? So we want to make sure that we preserve what this country is about, which is the dignity of every person. That’s the key. And what does that mean? Dignity—part of what is dignity—is that you get to choose who you want to spend your time with and who you want to share intimate details of your life with.”

The way the government relies on the private sector to collect and access Americans’ financial data “doesn’t accord with that fundamental principle that binds us together,” she said. (Watch the fireside chat featuring Neha Narula and Commissioner Hester Peirce)

DeFi is critical infrastructure. Whether or not DeFi is important to you, it’s undeniably important to the North Korean regime, which has exploited crypto networks for billions of dollars via its state-sponsored hacking group known as Lazarus. It was Lazarus’s use of Tornado Cash that sparked the crackdown leading to the criminal convictions of developers Roman Storm and Alexey Pertsev. The challenge of countering sophisticated state actors in cyberspace is not new in finance, attorney Michael Mosier noted during a panel that also featured Casey G., the CEO of zeroShadow, and Samczsun of the Security Alliance (SEAL). Mosier, a former director at FinCEN and at the National Security Council, has seen firsthand how the traditional financial system uses public-private partnerships to respond to incidents and share threat intelligence. However, he noted:

“The networks that we are talking about now are different.”

The three panelists described a huge amount of work that must be done on both the technical and legal sides to build the right “pipes” for sharing crypto threat intelligence effectively. (Watch the panel featuring Michael Mosier, Casey Golden, and Samczsun)

The Tornado Cash and Samourai Wallet prosecutions are chilling development. Michael Lewellen wants to build a smart contract-based crowdfunding protocol that would use zero-knowledge proofs to let donors remain anonymous. But he’s worried that he might get prosecuted for unlicensed money transmission—the same crime that Tornado Cash developer Roman Storm was convicted of, and Samourai wallet developers Keonne Rodriguez and William Lonergan Hill pled guilty to. As we’ve discussed at length in this newsletter, these prosecutions by the Department of Justice have contradicted something Treasury’s FinCEN said in 2019: if a software developer never takes control of user funds, they are not a money transmitter. Lewellen sees the Tornado Cash and Samourai prosecutions as contrary to the rule of law, so instead of building his protocol, he is suing the DOJ.

“With my lawsuit, I would like to have a definitive answer from the courts saying ‘No, they cannot do this anymore.’”

(Watch the fireside chat with Michael Lewellen)

A new approach to anti-money-laundering is possible. There’s a good argument that traditional approaches to anti-money-laundering (AML) and know-your-customer (KYC) processes are outdated. Either way, these established approaches don’t fit decentralized systems. Coin Center’s Peter Van Valkenburgh called on the audience to imagine:

“A better world, where new technologies like verifiable credentials, zero knowledge proofs, and open blockchains are used in alternate modes of AML where users own their own identity credentials, where they don’t need to repeatedly provide them unencrypted to every institution where they open an account, where they can selectively prove discrete facts about themselves, and where these proofs and credentials can be rapidly composable into effective but minimally invasive risk scores to address evolving money laundering threats without immediate de-banking for innocent folks and hopefully with fewer naive false positives from overtly simplistic identity practices.”

Van Valkenburgh and Coin Center have launched the John Hancock Project to help usher in this new world. (Watch Peter Van Valkenburgh’s talk)

Onchain privacy is like nuclear physics. Credit for that analogy goes to Wei Dai, a cryptographer at 1kx, who shared it during his keynote.

“It is a dual-use technology that can do great good for the world, but also can be very dangerous. For those that design and help shape these protocols, we need to be conscious of the potential risks with these protocols.”

Technologists face what Dai called a “trilemma”: privacy protocols can not simultaneously achieve perfect privacy, threat-resistance, and “maximum usefulness.” It’s possible to impose technical measures that reduce risk while sacrificing usefulness. Another approach, he explained, is to sacrifice perfect privacy for threat-resistance, by making it possible for certain entities to view certain parts of the transaction record under certain circumstances. This gives users the freedom to dissociate from other, malicious users, he argued. (Watch Wei Dai’s talk)

Ready or not, zero-knowledge crypto is going mainstream. Google has made it possible to use its wallet application to prove, using a zero-knowledge proof, that you are over the age of 18. It doesn’t get any more mainstream than that. And it’s just the start. As Northeastern University cryptographer Abhi Shelat and a16z research partner Justin Thaler explained during their panel, the technology is already capable of making age verification more private—and will soon be able to run all kinds of identity-related checks while maintaining user privacy. But Thaler has a warning:

“These protocols are orders of magnitude more complicated than today’s digital signature schemes or encryption schemes. And so they are full of bugs; we’ve got to be careful until we develop some confidence that there aren’t bugs there.”

(Watch the panel featuring Abhi Shelat and Justin Thaler)

The EU digital wallet initiative is a cautionary tale. How can we avoid dystopian digital ID systems? A panel featuring Amal Ibraymi from Aztec, Aisling Connolly from TACEO, and independent applied cryptographer Ying Tong grappled with that question. A particularly pressing real-world problem involves the EU’s digital wallet project, which offers a cautionary tale for other governments, Ying Tong said.

“The EU Commission themselves had set forth really strict requirements around unlinkability stating that issuers and verifiers should not be able to link individual presentations of a credential. Yet this did not prevent them from picking a solution that failed to comply with their own requirements. If they had done a careful threat modeling and if they done a careful examination and taxonomy of use cases, and if they had involved technical experts earlier on, this could have been avoided.”

(Watch the panel featuring Ying Tong, Aisling Conolly, and Amal Ibraymi)

AML is more than static checks. The GENIUS Act has provided an opportunity to reimagine AML for digital assets (whether or not anything comes of it). But verifiable, anonymous credentials that use zero-knowledge cryptography represent only one piece of the puzzle. Many of the ideas out there revolve around “static things” like “prove, at this time, that I’m not a North Korean. Prove I have a US passport, prove whatever,” noted Ian Miers, who joined fellow panelists Laz Pieper of the DeFi Education Fund and Ross Schulman of SpruceID to talk about what the future of AML could look like. Miers continued:

“None of the history of computer attack and defense or anti-money-laundering is a static system. You have to be able to react and adapt because any given tactic you pick, they’re going to adapt their tactics, techniques and procedures to get around it. That’s reality. It’s a cat-and-mouse game. That’s the game that FinCEN plays. That’s how they go to banks and say ‘Look, your AML flags aren’t up to date, you need to update them.’”

Miers argued that the goal should be a system in which users own their data and use it to calculate a “dynamic risk score” that institutions can use for AML and which can be constantly updated. (Watch the panel featuring Ian Miers, Laz Pieper, and Ross Schulman)

Be more precise about what you mean by privacy. Are you talking about pseudonymity, confidentiality, anonymity, or total privacy? What exactly are you hiding, and from whom? Why? For payroll, where it’s OK for employees to see each other get paid, keeping the amounts confidential might be enough. That’s the “vanilla” flavor of privacy, said Inco founder Remi Gai, who joined Predicate CEO Nikhil Raghuveera for the final panel of the day. If you don’t want everyone to be able to see who you are paying, anonymity is in order. “Total privacy”—hiding the sender, amount, and recipient—might be needed if you want to hide the movements of certain “sensitive assets,” Gai said. The flavor of privacy your system features will depend on the cryptographic techniques you use. Besides zero-knowledge cryptography, which can be used to prove things about the user, other methods like multiparty computation (MPC), fully homomorphic encryption (FHE), and trusted execution environments (TEEs) can be used to compute on encrypted data, for example, to produce risk scores. Compliance is extremely complicated—but blockchains are up to the challenge, Raghuveera said.

“The existing financial system is not programmable. That is actually something that blockchains have a massive edge on.”

(Watch the panel featuring Remi Gai and Nikhil Raghuveera)

We're thrilled to announce that the Second Annual DC Privacy Summit returns to Washington, D.C. on October 16, 2025, at the USC Capital Campus. Following the success of our inaugural event, this year's summit explores the idea that in many cases, privacy is security.

The summit reflects a critical recognition that new approaches to managing illicit finance risks in decentralized systems are needed—and that emerging cryptographic privacy tools can help.

At last year’s summit, we highlighted a dangerous impasse. Crypto and civil liberties advocates viewed the government’s crackdown on crypto privacy software developers as hostile and unfair, if not unconstitutional. On the other side, the government was approaching decentralized systems like Tornado Cash in the same way it approaches centralized financial institutions—even if that meant holding software developers responsible for crimes that users of their software commit, and which they could not have prevented.

A year later, though there are more “pro-crypto” vibes throughout the government, this impasse largely remains. Government officials still rely on old legal machinery in their attempts to manage the new risks that arise in decentralized financial systems. Ultimately, there’s been a chilling effect: many software developers working at the frontier of crypto are afraid they may be prosecuted if something goes wrong.

On top of all that, sophisticated, often state-sponsored hackers keep getting better at scamming and stealing, and at using crypto-privacy tools to cover their tracks.

What if these same technologies could be deployed toward managing the risks? We scratched the surface of this question last year, and this year we’ll delve deeper. At the very least, tools like zero-knowledge proofs make it possible to think about new ways of verifying crucial information, like that users haven’t been suspected of or associated with any crimes. There’s also an upside for users: the power to selectively disclose information about themselves—their birthday, age, national citizenship, or something else—without revealing anything else. That could mean fewer centralized servers full of personal data, which would make that information less vulnerable to hackers.

More secure. And more private.

We're bringing together the people wrestling with every facet of this conversation to explore creative and pragmatic new approaches. We’re excited and honored by the lineup of speakers who will be with us, including SEC Commissioner Hester Peirce, Johns Hopkins cryptographer Matthew Green, Peter Van Valkenburgh, Coin Center’s Executive Director, and Neha Narula from MIT's Digital Currency Initiative. Legendary white hat hacker Samczsun will share his first-hand experience of fighting state-sponsored hackers and other high-powered cybercriminals, while Justin Thaler from a16z and Abhi Shelat from Northeastern University will demystify zero-knowledge proofs and explain what they can—and can’t—accomplish in the real world. And applied cryptographer Ying Tong and others will talk about how to prevent the EU’s digital wallet from becoming a surveillance tool.

The summit will tackle the thorniest questions head-on. What could or should a post-KYC world actually look like? How can advanced cryptography help us catch the bad guys without trampling on everyone else's rights? And most urgently: how do we stop North Korea's Lazarus Group and other top-tier cybercriminals without sacrificing privacy innovations that could protect the personal data of ordinary citizens?

The stakes couldn't be higher. The trajectory of technology and law has lately bent towards greater surveillance and less freedom for individuals and institutions. This course can be altered, though. The choices we make about privacy technology today will echo through decades of digital life. We have the opportunity to build and implement systems that protect both individual privacy and collective security.

The conversation starts on October 16. We hope you’ll join us.

Register now at DCPrivacySummit.org

Government officials, members of academia, and media can reach out to us through the website contact form for information about alternate pricing.

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The man behind the curtain

by Veronica Irwin

When it comes to crypto in the second Trump era, two names are nearly ubiquitous: David Sacks, the abrasive venture capitalist-turned AI and Crypto Czar, and former North Carolina Congressional candidate Bo Hines, who serves as Donald Trump’s liaison to the crypto industry. As crypto policy has advanced rapidly over the last few months, their public statements have often been interpreted as bellwethers of President Trump’s own stance on crypto.

But according to our reporting, they have far less policy influence than their positions would suggest. Instead, a working group composed of senior officials from across the executive branch is steering the administration’s crypto policy, with one man in particular at its nexus.

That person is Tyler Williams, a career political operative and crypto policy consultant who has served as Counselor to Treasury Secretary Scott Bessent on digital assets and blockchain technology since late February.

Despite keeping a low profile, Williams has been burning the midnight oil since his appointment drafting the policy positions that inform President Trump’s actions on crypto. As the dedicated policy person coordinating a working group that the president established, he has been tasked with figuring out how best to increase the government’s bitcoin reserves, and shaping the White House’s stance on federal legislation going forward, like the CLARITY Act, which is meant to lay out laws around crypto markets.

Now that Trump has reached a major milestone in signing the GENIUS Act into law, where will his “pro-crypto” administration go next? Williams seems to be drawing a potential roadmap.

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Trump’s core crypto team

The working group—formally, the “President’s Working Group on Digital Asset Markets,” established by Executive Order 14178, which President Trump signed on his third day in office in January—includes Attorney General Pam Bondi, Commerce Secretary Howard Lutnick, and SEC Chair Paul Atkins along with eight other senior economic and security officials in the administration.

The executive order mandates that the group produce a report on two topics in particular: deciding how laws should regulate digital assets and how to manage a digital asset stockpile. The order states that today is the deadline for the report to be completed. It does not require that the report be released to the public, but the White House has said it will release it before the end of the month.

Hines will release the report, but he is not its primary author, according to five people who have spoken with both Williams and Hines about the matter. Hines effectively serves as a spokesperson, the sources say. He is present for many of the meetings and often calls them to order, but is not a key decider in the actual contours of policy. Williams, meanwhile, has significant say over the details of topics relevant to the Department of the Treasury in the report and, simultaneously, has taken the lead synthesizing the viewpoints of other departments in the working group and editing the language in the draft report so that all parties agree.

This influence is partly due to Treasury’s role in financial policymaking, but also to Williams’ experience in both the crypto industry and government. Before joining Treasury, Williams was the Head of Regulatory and Legislative Affairs and Regulatory Counsel at the crypto investment and financial services firm Galaxy Digital, and Deputy Assistant Secretary at Treasury during Trump’s first term, amongst several other private and public financial services policy jobs.

Hines “is not a particularly strong policy person—he is waking up every day and putting on a suit and carrying the President’s message. The way I think of him is he’s like a campaign staffer whose job it is to say nice things about crypto. And David Sacks is the guy who gave $80 million or something,” said one crypto executive who has met with the White House and Treasury. “Tyler’s the only person who’s capable and has the centrality to actually drive this [report] to completion.”

Imagining a “bitcoin reserve”

Trump made a lot of promises to crypto fans on the campaign trail, but perhaps the one that has inspired the strongest reactions was his promise to establish a “strategic bitcoin stockpile.” At first, this seemed like just a bitcoin thing. But as often happens in crypto, things quickly got a lot more complicated.

Ripple reportedly attempted to get its token, XRP, added to the reserve plans. To obscure its efforts, Ripple also advocated for the inclusion of other tokens, including ADA and SOL. Trump even posted on his own Truth Social platform that a reserve would include these three tokens, before posting that the reserve would also include bitcoin and ether.

On March 6, Trump signed Executive Order 14233, which created two separate categories: a bitcoin reserve and a “digital asset stockpile.” The order effectively directed the federal government not to sell the crypto it already has in its possession by virtue of criminal or civil asset forfeiture proceedings. It also authorized the Departments of Treasury and Commerce to come up with “budget-neutral” strategies (so that they can be carried out without Congressional approval) for adding more bitcoin to the reserve. It also stated that the federal government would not be acquiring additional amounts of other cryptocurrency tokens.

Williams has been taking meetings with industry representatives eager to pitch him on potential strategies for acquiring bitcoin in a budget-neutral way. In a particularly striking example, former CFTC Chair Chris Giancarlo said last month that he had met with senior Treasury officials—presumably referring to Williams—to propose using an obscure Constitutional provision to authorize crypto firms to hack foreign adversaries for their bitcoin as a lawful act of war.

Meanwhile, the Bitcoin Policy Institute, an advocacy group in Washington, has publicly advocated for Treasury to use the Exchange Stabilization Fund—a long-standing fund that the department typically uses to buy or sell foreign currencies—to buy bitcoin. Williams has also been pitched on ideas such as re-valuing or selling the gold at Fort Knox or selling altcoins to fund the bitcoin reserve, according to two sources familiar with the conversations.

In addition to the Exchange Stabilization Fund, “there are likely other means of budget-neutral acquisitions that we hope and expect the government to explore across the Treasury and Commerce departments,” said Bitcoin Policy Institute Executive Director Matthew Pines.

At Permissionless IV, a crypto conference in New York held last month, Hines confirmed that such discussions were underway. “We’re fleshing out these ideas with the folks over at Treasury and the folks at Commerce,” he said. “If you read the EO—the fine print—it kicks a lot of the responsibility in terms of producing these ideas over to these inter-agency actors. But we’ll flesh that out amongst the working group and then we’ll move on those [ideas] that are most expeditiously implemented.”

Charting Congress’s next steps

Beyond executive orders, what exactly would Trump like Congress to do about crypto? Williams seems to be in charge of informing him of the options. Specifically, now that the GENIUS Act is signed, the focus is on a piece of legislation meant to define which government regulators have jurisdiction for the various types of crypto asset markets. This is no small question, and the industry and the federal government have been fighting over it for years.

Last week, the House passed a new version of the bill, called the CLARITY Act. But the politics of crypto market structure are much messier than they are for stablecoins, if for no other reason than there are many more types of cryptocurrency tokens than there are stablecoins. Hanging over the debate is a crucial open question: what tokens are subject to securities laws?

Don’t expect the report to be too prescriptive. If it addresses legislation, it will likely stop at celebrating the passage of GENIUS as a win and lay out high-level “principles” for market structure legislation, according to the five sources who have met with Williams’ team. These principles are expected to focus on legal protections for DeFi developers, flexibility for future innovation, and a general encouragement of domestic tech growth. All of the sources Project Glitch spoke with expect that the report will contain few specifics, assuming it is published.

If the White House does choose to push for more specific legislative measures, that would be a big deal, because President Trump could exert pressure on Republican members of Congress to comply. The White House has already shown that it’s willing to exercise this sort of influence.

“It’s a dual process—we’re talking through things as a working group and providing technical feedback to the staffers on the Hill that are devising this new policy,” Hines said at Permissionless. “We’re working together to create a seamless transition into a completely different landscape for the industry itself.”

New agenda items?

Of course, stablecoins and market structure aren’t the only crypto-related issues under Treasury’s purview. For instance, Coin Center Executive Director Peter Van Valkenburgh told Project Glitch that they had approached Treasury with requests to reiterate 2019 FinCEN guidance, which has been widely interpreted to say that blockchain-based apps that don’t take control of customer funds, such as Samourai Wallet and Tornado Cash, are not money transmitters. We could see some reference to these issues in the report, depending on how it frames the issue of protecting software developers.

Van Valkenburgh said Coin Center has also had discussions with Treasury to rescind past IRS guidance stipulating that the monetary rewards that cryptocurrency miners receive for their work, called block rewards, should be taxed as income. “It is our hope that their July 22nd report will flag the past block reward guidance as legally incorrect and bad policy so we can start a process of rescinding it,” said Valkenburgh.

There’s a chance the public won’t ever see the report. Trump’s January executive order does not require that it be released or acted upon. However, a White House official has said that it would be released before the end of the month.

“In comparison to other reports that end up on a shelf somewhere, this comes directly from the president in an executive order—and particularly a president who has made it a core part of his policy to focus on crypto,” Coin Center Director of Policy Jason Somensatto said. “Policy in this area is being driven at the White House level, and so their opinions on where things go become really relevant.”

Treasury declined to comment.

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Why cryptographers and privacy advocates are worried about the EU’s digital identity wallet

The next time you renew your driver’s license or passport, it may come with some new features: a link that sends information to the government every time a vendor scans the ID, and a switch the government can use to wipe all your identifying information at will.

Whether you want these capabilities—or trust that the government knows what it's doing when it comes to preserving your privacy—for millions of people living in the European Union, they’re already in use, part of large-scale pilot tests of the Digital Identity Wallet program, which the European Commission could roll out to the its 500 million citizens by the end of 2026.

The bloc has called the project “Europe’s answer to the challenges of identification.” The new digital ID wallet, which will include a credential that allows holders access to both public and private services that require a government ID, is supposed to make it easier for citizens of EU member states to do things like open a bank account and travel. In the long run, it’s meant to contain credentials like driver's licences, educational certificates, medical records, and proof of insurance.

Digital versions of your government ID may seem like a logical extension of the Google and Apple wallets people already use on their phones to hold things like credit cards and tickets.

And the European Commission seems to be pushing this narrative. “Citizens should be able to carry their digital identity with them across the EU, moving seamlessly across borders without ever losing control of their data, with privacy and security at the heart of the project,” reads the text on its website for the digital ID program.

But cryptographers say the technical design of the wallet the EU is piloting has flaws that could make it easier for governments to spy on holders—or worse, turn off the wallet and render the credentials in it useless.

And they’ve recommended that the EU go back to the drawing board.

Unlinkability

The laws and regulations that led to the EU’s Digital Identity Wallet pilots are not themselves problematic from a privacy standpoint. The regulation mandating the wallet, known as eIDAS (electronic Identification, Authentication, and Trust Services), states that an ID system should let users remain pseudonymous and keep their sensitive personal information “unlinkable,” to technically prevent issuers from surveilling users by connecting that information to all the times and places they scan the credential.

“But that is just the law. The law says what should be done but not how,” Anja Lehmann, a cryptography professor at the University of Potsdam, lamented in March during a talk focused on the EU Digital ID project at the Real World Cryptography conference in Bulgaria.

The cryptography community has developed the capabilities necessary to make digital IDs that are, in fact, unlinkable to transaction data and other information related to a user’s activity. Those technologies include zero-knowledge proofs and other forms of advanced cryptography.

The system the EU is testing doesn’t take advantage of these tools, however. Details are scant, but sources familiar with the process tell Project Glitch that the technical design for the EU wallet seems to have been formulated largely behind closed doors by a small group of people at SPRIN-D—an agency in the German government that describes itself as an incubator for disruptive innovation.

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“We’ve been researching unlinkable forms of hashing and ways of passing data for years and they're just doing something we could have done 20 years ago,” said one cryptographer who asked not to be named due to sensitivities around their work status in the EU.

Kim Hamilton Duffy, executive director of the Decentralized Identity Foundation, calls the EU pilots “an attempt to capture and print new standards [for digital ID].” According to the regulation, such standards “are supposed to be influenced by self-sovereign identity or decentralized identity, which has in mind the idea that: ‘I hold my credentials, I control who I share them with, and I consent to any additional sharing,’” she said.“But the current approaches are violating almost all of these principles.”

A “phone home” feature and a kill switch

To begin with, as Lehmann explained during her talk in March, the wallet lets the issuer link the holder’s transactions to their ID by deploying a feature that “phones home” to the issuer’s server every time it’s scanned.

This means if you were to use your wallet to, say, verify that you are old enough to buy a bottle of wine or get into a club, there’s a chance the government could receive that information from the vendor, record it, and use it to surveil you. This problem has been flagged by civil liberties groups in the US, too, with the same design embedded in mobile driver’s licenses, or “mDLs,” that some states are now issuing.

“When you hand over your mDL, you are handing over a 100% trackable token,” says Manu Sporny, CEO of Digital Bazaar, a company developing digital identity technology and technical standards. Sporny is also the chairman of several initiatives at the World Wide Web Consortium, which develops standards for open-source technology.

The design of the EU’s ID wallet would also give the governments the power to turn off the wallet at will. Think about all the places where you have to show your ID. What if your government had the power to render your ID card useless, perhaps as punishment for something you wrote on social media? What if it simply switched your wallet off by accident? “If you have a government-issued credential and you have no choice but to put it in a government-issued digital wallet, that is a very bad outcome,” Sporny says.

Sporny says what’s needed is a “truly open wallet infrastructure”—not one in which the government wallet is the only option. “Fundamentally, the individual should have a right to choose which organization is holding their most private information,” Sporny adds.

In June of 2024, Lehmann and 15 other cryptographers published feedback on the EU Digital Identity Wallet project. “We do not see a way to fix the proposed solution to meet all the privacy features as required by the regulation,” they wrote. “We believe that a larger redesign is in order.”

“We can see now that there’s not a good understanding of how security and privacy can coexist and can coexist in different shapes,” Lehmann said in her talk this year.

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It’s not too late

There are ways the EU could change course before its wallet is rolled out en masse. Sporny says one path for future consideration is a single-use identity credential system.

“Think of it as an over-age token, or something of that nature,” he says. It would work similarly to how today’s credit cards do. “So when you use a credit card today, your credit card is tokenized—either on your phone, or the second you tap your card,” he says. This is what keeps your credit card number safe. “The number is never sent over the wire; it’s just an authorization.”

There is already a standard for this sort of single-use credential technology. It’s deployed in the US under the name TruAge and is used to standardize age verification when people show their ID for age-restricted products at more than 150,000 convenience stores around the country.

But implementing this technology would call for infrastructure similar in scale to the vast networks built and operated by credit card companies like Visa and Mastercard. That would be expensive to operate smoothly.

Lehmann and her 15 co-authors have recommended a different technical design, based on a so-called BBS signature—an emerging standard for employing zero-knowledge proofs that prioritizes unlinkability.

BBS builds on digital signature technology, which lets a user holding a private cryptographic key sign a message so that anyone who holds the corresponding public key can verify it. The BBS scheme makes it possible for a user to sign multiple messages. Someone who has a signature and messages (various personal data points) can selectively produce zero-knowledge proofs that reveal selected pieces of information while keeping the rest of their personal data secret.

Despite being a cryptographer-approved approach, however, there’s another obstacle to adoption: No EU governments are currently allowed to use it. BBS signatures would have to be added to the EU’s list of approved cryptographic technologies.

Updating the list before the broad rollout of the EU ID system is not beyond the realm of possibility. The EU has solicited comments on the potential usage of zero-knowledge cryptography for the wallet, and plans to consider the responses in August.

In the absence of a turnaround in the wallet’s technical specifications, another way to deal with the threats to civil liberties posed by the EU’s digital ID system would be to make policies designed to neutralize those threats. Member states could promise that they will not use the “phone home” feature, for example.

Hamilton Duffy would rather the technical design keep things private on its own. “There’s this more baked-in notion of trusting governments in the EU. So people might be more OK with relying on the idea of policy versus tech,” she says. “But a lot of us elsewhere don’t trust our government.”—Lucy Harley-McKeown

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Trump’s government is prosecuting important crypto cases in much the same way as the Biden administration did

Donald Trump has promised to make the US the “crypto capital of the world,” and there’s been plenty of activity that would appear to be evidence that he’s following through. He has, for example, staffed the executive branch with outwardly “pro-crypto” individuals, from Treasury Secretary Scott Bessent to Paul Atkins, the new head of the Securities and Exchange Commission. His party, which controls both houses of Congress, has crafted legislation that would largely benefit the industry. And of course, he is the proud owner of a Trump-branded memecoin and stablecoin.

And yet, the most extreme legal threats that crypto endured during the Biden years—which many people in the industry argued were reasons to support Trump in last year’s election—remain as strong as ever.

The most prominent example of this is the case of Tornado Cash, the Ethereum-based privacy tool. Advocates had hoped the administration would dramatically change course on Tornado Cash, and in particular that the Department of Justice would drop its prosecution of Roman Storm, one of its developers. That hope was reinforced when Trump’s deputy attorney general, Todd Blanche, distributed a memo in April asserting that the Trump DOJ would discontinue its predecessor’s “reckless strategy of regulation by prosecution,” echoing a frequent critique of the Biden administration by advocates of cryptocurrency technology.

Nevertheless, last month, the US attorney for the Southern District of New York (SDNY) revealed in a letter to the judge overseeing the case that it still plans to pursue nearly every charge against Storm.

Taken together with some subtle legal maneuvers by the Treasury Department when it removed the Tornado Cash software from its sanctions list in March, it does not appear that the new administration has imminent plans to quell the fear of prosecution that’s haunted many crypto developers for nearly three years.

A small victory

The SDNY’s letter did contain one concession, small in the context of the Storm case, but significant in the broader legal conflict. Namely, it informed the judge that federal prosecutors will back off from one portion of the charge that Storm operated an “unlicensed money transmitting business.”

Storm and another developer, Roman Semenov, were indicted in 2023. The indictment alleged that North Korean hackers used Tornado Cash to launder hundreds of millions of dollars in crypto they stole from a video game called Axie Infinity. It charged Storm and Semenov with conspiracy to launder money, conspiracy to violate sanctions against North Korea, and conspiracy to operate an unlicensed money transmitter. Storm was arrested in August 2023 and is scheduled to face trial in July. Semenov remains at large.

The unlicensed money transmitter charge is the one that has riled the crypto policy community the most. It’s also made many in the industry feel betrayed by the government.

Money transmitting businesses are required by a US law called the Bank Secrecy Act (BSA) to register with the Treasury’s Financial Crimes Enforcement Network (FinCEN). In 2019, FinCEN published guidance that was widely interpreted as saying that in order for someone to qualify as a money transmitter, they had to take “total independent control” of user funds.

The Tornado Cash smart contracts work without anyone other than the users ever taking control of their money. The 2019 FinCEN guidance implied, therefore, that Tornado Cash didn’t need to register.

But in a brief to the court last spring, the DOJ prosecutors argued the contrary: you can be a money transmitter even if you don’t take control of user funds. Then the judge in the case shocked the crypto policy community by agreeing with the DOJ.

This created an obvious “rule of law problem,” according to Peter Van Valkenburgh, executive director of the policy research and advocacy group Coin Center. “To me, no one should ever be charged with failure to get a license from a regulator who said they didn’t need a license in the first place,” he said at Project Glitch’s DC Privacy Summit last October.

Now, the DOJ seems to have changed its mind. Last month, it announced it would no longer argue that Storm broke the law by failing to register with FinCEN. On one hand, this is “huge news,” according to Van Valkenburgh. On the other hand, it’s the only aspect of the indictment that the government has decided to back off from following Blanche’s memo. Although the DOJ concedes that there was no need to register, it still alleges that Storm operated an unlicensed money transmitting business. The prosecutors cite separate language in the law to argue that it was still unlicensed money transmission—even if they didn’t have to get a license—because the transactions in question “involve(d) the transportation or transmission of funds” that Storm allegedly knew to be of criminal origin.

Confused? You’re not alone. “It honestly doesn’t make sense,” Van Valkenburgh said this week during a panel I moderated at PGP* for Crypto, a monthly gathering of crypto policy insiders in Washington, DC. “If you are going to find them guilty of unlicensed money transmission, but there was no one that was requiring them to license—how insane is that?”

The DOJ has since made the same argument in a separate criminal case against Keonne Rodriguez and William Lonergan Hill, developers of a Bitcoin privacy tool called Samourai Wallet, dropping the charge that they failed to get a license but continuing with the charge of conspiracy to operate an unlicensed money transmitting business. This case recently spotlighted the discrepancy between FinCEN and the DOJ’s views on what constitutes a money transmitter. The defense team publicized a summary of a phone call between federal prosecutors and two FinCEN employees, in which the FinCEN representatives argued that since Samourai doesn’t take control of user funds, that would “strongly suggest” that it isn’t a money transmitter.

The continuation of these charges has dashed hopes that Blanche’s memo would mark a radical change of course for the DOJ. Amanda Tuminelli, executive director and chief legal officer at the DeFi Education Fund, a policy advocacy group in DC, said during the PGP* for Crypto panel that parts of the memo were positive for the industry. “I think the spirit of the memo was a good one,” she said. But in the high-stakes conflict over what constitutes a money transmitting business, “it did not solve anything.”

Tuminelli argued that Congress should amend the criminal code to “close the window for this to ever be misinterpreted again” by clarifying that the language in the criminal statute does not apply to software developers who don’t take control or custody over customer funds.

The North Korea factor

There’s also the matter of the sanctions the Treasury Department’s Office of Foreign Assets Control (OFAC) slapped on Tornado Cash in 2022. Coin Center and others brought lawsuits against OFAC, arguing that it did not have the authority to sanction decentralized software. Then, last November, the industry landed a legal haymaker against the government in one of those cases. The Fifth Circuit Court of Appeals ruled that OFAC did not have the authority to sanction Tornado Cash’s “immutable” smart contracts, since these contracts are not “property.” In March, the Treasury took the smart contracts off the sanctions list.

But some important signals suggest the government isn’t ready to give in on this issue.

To begin with, the Treasury did not frame the action as a concession of error, as Michael Mosier, co-founder of the law firm Arktouros, and a former official at OFAC as well as director of FinCEN points out. Instead, the agency said it had “exercised our own discretion to remove the economic sanctions.” That’s an “extremely calibrated response” to the Fifth Circuit’s decision, Mosier noted during a recent talk in DC. The agency may be preparing additional moves.

A second important signal is in how the government treated the sanctioned Tornado Cash developer Roman Semenov, who is a citizen of Russia.

Some backstory: OFAC originally sanctioned the Tornado Cash software under an executive order issued by President Barack Obama in 2015 that was targeted at cybercrime. In November of 2022, OFAC re-did the sanctions, adding a second designation under a separate Obama-era executive order, this one aimed at making it harder for North Korea to finance its nuclear weapons program. In August 2023, OFAC added developer Roman Semenov to the sanctions list under both executive orders.

When OFAC removed the cybercrime and North Korea-related sanctions for Tornado Cash in March, it left Semenov on the list of entities sanctioned under the North Korea executive order.

“There are much broader enforcement authorities for the North Korea program,” compared with the more generic cybersecurity order, Mosier explained. That means the government would have an easier time defending this sort of action in court. Mosier suggested that the Treasury was sending a message in the way it removed Semenov’s cyber designation but left him on the North Korea-related sanctions list. “By removing the cyber tag and leaving on the DPRK tag, it caused his designation to be republished publicly in the same press release (announcing) that they were de-listing the (Tornado Cash) addresses,” he said. “That is a strong signal that shows to Congress, and to developers around the world: ‘We’re not leaving this space.’”

For as much as Trump loves crypto, it appears there are flavors of it that his administration disfavors just as much as the Biden administration did. —Mike Orcutt

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