By: Eran Barak, CEO at Shielded Technologies
For over a decade, the US crypto landscape has been caught in a legal ambiguity. Regulatory bodies have fluctuated between inaction and abrupt enforcement, leaving developers, investors, and entities in a state of confusion.
However, in 2025, changes began to take shape. The SEC discontinued its case against Binance, emphasizing the necessity for clearer regulations. The Senate enacted the GENIUS Act, establishing a federal framework for stablecoins, with a high likelihood for the CLARITY Act to become law.
Even the White House reassessed its position, retracting earlier guidance discouraging employers from including crypto in retirement portfolios. An executive order now permits 401(k) investments in digital assets — signaling a shift in Washington’s perspective, recognizing these assets as market-viable rather than inherently risky. This has garnered institutional interest.
While lawmakers may be opening pathways, institutions will remain reluctant unless the infrastructure evolves concurrently, confining blockchain to speculation driven by retail participation.
Infrastructure with alternate intentions
The financial regulations of today were conceived in a different era and struggle to keep pace in this digital landscape. Initially, blockchains aimed to foster trust and resist censorship through radical transparency, yet this fundamental design conflicts with contemporary expectations surrounding privacy, selective access, and compliance.
This discrepancy makes it challenging for most blockchains to adhere to governance frameworks originating from political processes or to meet specific legal criteria for sectors like finance, healthcare, or data management.
For instance, the European Union’s General Data Protection Regulation (GDPR) grants users the right to be forgotten, but once data is published on a blockchain, it cannot be modified.
The US Health Insurance Portability and Accountability Act (HIPPA) mandates stringent protections for health records, yet no hospital can safely house patient data where every access is publicly visible. Financial entities, on the other hand, require selective disclosure — sharing data with specific parties only.
Markets characterized by complete transaction transparency tend to be inefficient, as fund movements can be tracked instantly, allowing counterparties to react against those signals.
Many blockchains aren’t equipped for regulatory realities
For regulation to hold significance, the systems it seeks to govern must possess the ability to comply. This is where a significant gap lies today.
The promise of Web3 includes control, privacy, and ownership. However, the architecture often translates those ideals into compromises: privacy that clashes with regulatory compliance, or openness that undermines compliance and user trust.
Related: Privacy will unlock blockchain’s business potential
This issue extends beyond transaction data. Metadata associated with each transaction — detailing who accessed it, when, and under what circumstances — can be as revealing as the data itself. Most networks overlook this aspect, knowingly exposing developers and institutions when it comes to compliance and audit requirements.
This paradigm must shift if we aspire for blockchain to benefit more than early adopters and retail scenarios. In traditional markets like Nasdaq and the NYSE, approximately 80% of trading is institutional, whereas in crypto, it is nearly the contrary, with retail being predominant.
If infrastructure does not adapt, new legislation will only propel crypto to a limited extent. While institutions may appreciate the clarity, they will hesitate to invest substantial capital until the systems they depend upon satisfy the operational, legal, and risk standards of regulated sectors.
The path ahead
Blockchain has demonstrated that programmable assets and global settlement can be effective. The current challenge lies in scaling these for institutional application. This necessitates the development of infrastructure capable of balancing blockchain’s transparency with the need for privacy, selective disclosure, and compliance — ultimately fulfilling the legal and operational standards of regulated industries.
A decade back, early cloud platforms encountered comparable obstacles concerning security, auditability, and compliance. It required years of engineering, standard establishment, and refinement before those systems could cater to the world’s most risk-sensitive sectors. Presently, blockchain is at the same juncture.
Fortunately, new frameworks are emerging. Zero-knowledge proofs, selective disclosure, and innovative tokenomic designs provide developers with the essential tools for privacy and compliance, eliminating the need for centralized gatekeepers. These resources are coming to the forefront just as regulatory frameworks are intensifying.
If they can progress concurrently, blockchain has the potential to transcend mere speculation or niche applications.
It can evolve into a trusted platform for the next generation of financial and data infrastructure, propelling the global economy forward.
By: Eran Barak, CEO at Shielded Technologies.
This article serves for general information purposes and is not intended as, nor should it be considered legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
