Still, Fernandes warned that AML and KYC constraints, particularly around off-ramps, remain the sector’s biggest vulnerability.
‘The greater the interest, the greater the scrutiny’
“You can only fly under the radar for so long,” Fernandes said. “The greater the interest, the greater the scrutiny. Sooner or later, regulators will reach out and say, ‘You can’t bank with that exchange if you list zcash.’ Exchanges have limited options for payment processors, and banks can exert enormous influence.”
Fernandes also said privacy assets may benefit from regulation in the short term, but face an unavoidable showdown. “As the EU introduces increasingly draconian regulations, privacy coins are only going to be more interesting to people. But that also sets the stage for their inevitable confrontation with regulators.”
Despite those risks, Fernandes sees demand rising.
“Retail interest increasing is inevitable given regulations are ever expanding,” he said. “The real question is how privacy coins fare once regulators turn their full attention to them.”
Industry figures have echoed those concerns from a different angle. Arthur Hayes argued that rising geopolitical tension and expanding financial surveillance make privacy tools increasingly relevant, while also warning that greater visibility and usage could draw intensified regulatory attention, reinforcing the sector’s long-running tension between utility and compliance.
‘Winners won’t be the loudest privacy coins’
Mati Greenspan, founder of Quantum Economics, framed privacy’s resurgence as a reaction to blockchain transparency itself. “Privacy coins are outperforming because transparency became overused as a control layer,” Greenspan said. “When everything is traceable, privacy shifts from philosophy to utility.”