U.S. Treasury’s GENIUS Act Sets Stage for Privacy-First Crypto Regulation, Says a16z
Andreessen Horowitz's Michele Korver has urged the U.S. Treasury to prioritize privacy-first crypto compliance with decentralized digital identity (DID) and zero-knowledge proofs (ZKP) as part of the GENIUS Act implementation. Korver emphasized the need for modernized anti-money laundering (AML) and Know Your Customer (KYC) rules to strengthen national security while protecting individual privacy. a16z proposed using decentralized identity solutions for compliance, enabling secure personal data management while ensuring regulatory oversight. The firm also called for clearer classifications of stablecoins and smarter compliance measures instead of stricter surveillance. This initiative received strong support from the crypto community as a pivotal step toward privacy-centric digital finance and innovation-driven regulation.
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Introduction: Privacy-First Compliance in Crypto
Michele Korver, Head of Regulatory at a16z Crypto, has urged the U.S. Treasury to adopt a privacy-first approach to cryptocurrency compliance. She emphasizes the use of decentralized identity (DID) and zero-knowledge proofs (ZKPs), which she believes can enhance both security and privacy in the crypto ecosystem. As the Treasury begins to implement the landmark GENIUS Act, Korver emphasizes the balance between security, innovation, and digital freedom.
Decentralized Identity and Zero-Knowledge Proofs
In her submission to the Treasury, Korver outlined the transformative potential of decentralized digital identity (DID) and privacy-preserving cryptography. These technologies can make crypto compliance safer, more transparent, and less intrusive. She stressed that current AML/KYC rules are outdated and encouraged FinCEN to modernize them by integrating digital wallets and blockchain-based tools instead of reliance on centralized databases.
By leveraging zero-knowledge proofs (ZKPs) and multi-party computation (MPC), institutions can verify users without exposing sensitive personal data. This approach reduces risks such as surveillance, hacking, and large-scale data breaches, offering a privacy-first compliance framework that maintains regulatory visibility.
Call for Modernizing Compliance Rules
Korver proposed that FinCEN utilize its exceptive relief authority to address existing framework limitations. Decentralized identifiers (DIDs) and verifiable digital credentials (VDCs) were presented as tools capable of meeting obligations under the Bank Secrecy Act (BSA) and AML laws. However, these tools are not officially recognized under current Customer Identification Program (CIP) rules.
a16z recommended recognizing decentralized identity as a valid 'non-documentary' compliance method and extending exemptions to money service businesses (MSBs), which include crypto exchanges. This proposal promotes both privacy and efficiency in the crypto sector.
Balancing Compliance with Innovation
a16z urged for clearer definitions to differentiate decentralized stablecoins from payment stablecoins. This move aims at fostering fair competition and innovation-friendly oversight. The firm backed its arguments with data showing that less than 1% of on-chain transactions are illicit, underlining that targeted, tech-driven solutions—instead of stricter governmental surveillance—are the future for effective compliance.
Community Response to Privacy-First Regulation
The crypto community has rallied behind a16z’s privacy-first initiatives. Industry leaders and developers across platforms such as X (formerly Twitter) have praised these measures as steps toward responsible digital finance regulation. Supporters, including prominent figures like Phan Howellter and developers from Inception, regard the GENIUS Act as a turning point for the U.S.
This legislation offers an opportunity for the U.S. to lead in privacy-centric crypto regulation, proving that privacy, compliance, and innovation can coexist harmoniously in the evolving digital finance space.