Privacy blockchains have been popular for years, but they have always swung between two extremes—either fully anonymous, which attracts regulatory scrutiny; or compliant at the expense of privacy, making users feel their privacy is invaded. Is there a way to achieve both?

The Dusk project offers an interesting solution. Instead of confronting the issue head-on, they have designed a clever technical approach: a layered privacy ledger. How does it work? Transaction data is divided into two parts—the public audit layer and the private transaction layer.

The former is transparent to regulators, satisfying anti-money laundering and counter-terrorism financing requirements; the latter keeps user information confidential, protecting user assets. This approach is not simply an all-or-nothing anonymity nor a complete abandonment of privacy, but rather leaves room for regulatory oversight while safeguarding user rights. It may sound like walking a tightrope, but it is indeed an innovative idea in privacy blockchains.

Having the technology alone is not enough. The Dusk team also focuses on ecosystem operations—actively communicating with regulatory authorities worldwide, and being a member of the European Blockchain Association. They have participated multiple times in the revision discussions of the EU’s crypto asset regulation (MiCA). They directly incorporate compliance requirements of privacy technology into legislative proposals, turning regulatory response into proactive rulemaking.

Even more interesting, Dusk has established a Compliance Committee within the community. Composed of lawyers and industry representatives, it is responsible for reviewing whether ecosystem projects meet regulatory standards. It’s like setting up a quality gate for themselves. This practice is quite rare among privacy projects and, to some extent, demonstrates a commitment to compliant development.

Overall, privacy and compliance are not necessarily at odds. The key is whether they can find that balance point, making innovations in both technology and institutional arrangements.