Opinion by: Vikrant Sharma, CEO of Cake Labs
On June 30, 2025, the United States Supreme Court declined to review Harper v. Faulkender, effectively endorsing the IRS’s broad “John Doe” summonses for cryptocurrency records.
By maintaining a lower court’s decision, the court upheld that the established third-party doctrine applies to public ledgers as it does to bank records. According to this doctrine, information shared with third parties, such as a bank or blockchain, loses its Fourth Amendment protection. Once data leaves a person’s hands, constitutional privacy rights are diminished.
For on-chain transactions recorded across any blockchain, nearly all payments are now available for warrantless examination. Prosecutors, tax officials, and anyone else willing to sift through public data can access anyone’s financial details at will.
Analytics profiteers weaponize “radical transparency”
No one has capitalized faster than blockchain forensics companies. The global analytics market is set to reach $41 billion this year, nearly double the total for 2024. Their clustering algorithms currently identify over 60% of illicit stablecoin transfers, which is impressive, yet highlights the decreasing effectiveness of pseudonymity.
The appeal to regulators is undeniable: “Compensate us, and all wallets become transparent.”
However, this sweeping approach also collects innocent data, swamping databases with records of payroll, healthcare, and political donations.
This data remains perpetually vulnerable to leaks or legal inquiries. Congress won’t intervene. Only cryptographic solutions can bridge this gap until lawmakers redefine privacy for the digital age.
Certain Bitcoin privacy techniques allow users to share a static receiving address while creating separate, unlinkable on-chain outputs that obscure basic analytical patterns.
Related: US Supreme Court will not review IRS case involving Coinbase user data
Other strategies involve coordinating inputs from multiple sources to obscure the typical “sender vs. change” distinctions analysts rely on.
Because these methods do not use custodial mixing services, enforcing sanctions like those on Tornado Cash in 2022 becomes more complex.
If wallets and payment platforms adopted such defenses by default instead of as optional features, baseline privacy could achieve broader accessibility as encrypted web connections become normalized.
Ignore privacy, suffer market fallout
Investors often overlook warning signs until it’s too late, and neglecting protocol-level privacy could have serious repercussions. Emarketer anticipates a consumer payment adoption surge of 82% from 2024 to 2026, but only 2.6% of Americans are projected to use crypto for payments by 2026.
Widespread adoption hinges on perceived security and privacy. If baristas can connect tips to specific addresses, mainstream wallets may stagnate. While this truth may alarm consumers, institutional investors are wary of the compliance challenges they face.
According to the court’s interpretation, portfolio managers handling on-chain assets must assume that regulators constantly monitor their strategies and counterparties. Funds utilizing privacy-enhanced protocols will enjoy a layer of trade secrecy inaccessible to competitors who ignore the available tools.
Silence is complicity
History indicates that markets reward early adopters who integrate civil liberty protections into the systems that support them. For instance, email encryption transitioned from niche to standard in enterprise software-as-a-service.
A similar trajectory can unfold for blockchain if developers, custodians, and layer-2 networks make privacy a fundamental requirement rather than a mere feature. Inaction now could leave the ecosystem reliant on unpredictable judicial attitudes and fluctuating stability.
The Supreme Court has clarified its position; the responsibility now lies with engineers to create meaningful and purposeful privacy solutions.
Either blockchains adapt to safeguard users by default, or the vision for decentralized finance may erode into a reality characterized by the most transparent and monitored payment system ever established.
Opinion by: Vikrant Sharma, CEO of Cake Labs.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
