Vitalik Buterin has demonstrated a newly launched privacy tool on the Ethereum blockchain, highlighting efforts to balance user anonymity with compliance concerns.
The feature, known as Privacy Pools, was developed by 0xbow.io and is designed to allow users to make transactions anonymously while proving their funds are not linked to illicit activity. The platform enables semi-permissionless access, with initial deposits capped at one ether.
Buterin was among the first users to interact with Privacy Pools, reportedly making a deposit shortly after the tool went live on March 31. The system relies on so-called “Association Sets”, which group transactions into anonymous pools while applying screening mechanisms to exclude funds tied to hackers, scammers or other criminal actors.
According to 0xbow.io, the Association Sets are dynamic, meaning deposits later flagged as illicit can be removed without disrupting the rest of the pool. Users whose funds are disqualified are able to withdraw their assets using a built-in “ragequit” function.
The launch comes at a sensitive time for crypto privacy tools. Regulators have intensified scrutiny in recent years following the use of privacy protocols for money laundering. In 2022, the US Treasury Department sanctioned Tornado Cash after linking the mixer to roughly $7bn in illicit flows.
Blockchain analytics firm Chainalysis reported that illicit crypto transfers exceeded $41bn in 2024, accounting for about 0.14% of total on-chain volume. While that figure marked a decline from 2023, Chainalysis warned the total could rise as additional criminal addresses are identified.
Early adoption of Privacy Pools appears modest but growing. More than 21 ETH has been deposited across 69 transactions, with backing reported from investors including Number Group and BanklessVC.
Developers say the project aims to demonstrate that privacy and regulatory safeguards do not have to be mutually exclusive, a debate likely to intensify as governments tighten oversight of crypto transactions.
