UK Think Tank to Regulators: Banning Privacy Tools Is Like Telling Criminals to Go Full DeFi

A new report from the Royal United Services Institute (RUSI)—the world’s oldest defense and security think tank, and the only one that still uses fax machines for “urgent” briefings—argues that banning blockchain privacy tools is like telling criminals to go full DeFi: sure, you’re trying to stop them, but you’re just handing them a yield farm with no KYC. The paper warns that blanket bans won’t stop bad actors; they’ll just make them drop their wallets into the wild west of unregulated chains where even the devs don’t know what chain they’re on.

The report, born from UK Home Office roundtable discussions in July 2025 (where regulators sipped £7 lattes and debated if ZKPs are a tech or a brunch trend), identifies four real reasons people want privacy: avoiding hacker ransomware via Telegram DMs, dodging AI that’s more nosy than your aunt at a family reunion, crypto startups hiding their payroll from rivals (because nothing kills morale like “Bob makes 10x more than you” on-chain), and high-net-worth folks fleeing authoritarian regimes that track your NFTs like a crypto version of Big Brother’s loyalty card.

Roundtable attendees—including regulators who still think “on-chain” means “on the train,” and industry folks who’ve seen one too many “compliance-friendly” token launches—repeatedly agreed that outlawing privacy tech is like banning lockpicks because burglars use them. Illicit actors? They’ll vanish into the DeFi shadows, leaving law enforcement with fewer partners, fewer leads, and more “we don’t know who sent this” blockchain mysteries. Basically, you’re not stopping crime—you’re just making the police’s job harder while the bad guys get a free pass to use privacy tools with zero accountability.

Instead, the group pushed for regulators to stop treating privacy tech like crypto’s evil twin and start treating it like a really well-encrypted chat app. They suggested privacy-enhancing tools could actually make surveillance easier—think of it as giving cops a magnifying glass that only shows illegal stuff, not your NFT collection of bored apes. The report specifically calls out zero-knowledge proofs (the crypto version of “I’m not lying, but I’m not telling you anything”), confidential stablecoins (stablecoins that don’t tattle on your grocery run), and privacy pools (where your mix is so good, even your mom can’t find your transaction).

Report author Allison Owen—whose LinkedIn says “crypto compliance ninja” and whose Twitter bio says “I believe in privacy, not panic”—noted that companies blending privacy tools with compliance features actually want to talk to the government. She stressed that we shouldn’t let the 0.1% of bad actors ruin it for the 99.9% of people who just want to send money without their landlord knowing they bought a yacht. “It’s not about hiding money,” she said. “It’s about not having your entire financial history auto-posted to Reddit like a Coinbase receipt.”

The report leans hard into real-world use cases, including protection against “$5 wrench attacks” that cost $41 million in 2025—because nothing says “I’m a criminal” like a guy with a crowbar and a Ledger. Other drivers? Crypto firms hiding salaries so their devs don’t all quit to start a memecoin called “PayMeBetter,” and businesses trying to keep their supply chain moves secret from competitors who Google their wallet addresses at 2 a.m.

Participants believe privacy tech isn’t going anywhere—it’s growing like a DeFi yield farm after a hype tweet. Zero-knowledge proofs? By year’s end, they’ll be in more enterprise dashboards than Excel macros