Opinion by: Boris Bohrer-Bilowitzki, CEO of Concordium
Stablecoins have been hailed as the connective tissue linking the crypto world to traditional finance. They promise the efficiency of blockchain — faster, cheaper, better transactions — while maintaining the stability of a pegged asset, typically the US dollar. This proposition is compelling for institutions seeking to overhaul their antiquated, expensive infrastructure.
Beneath the promise of revolutionary efficiency lies a critical yet often overlooked peril: the surveillance risk embedded in these digital assets, particularly when they integrate with traditional Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance systems.
Many major banks are also now weighing whether to issue their own stablecoins, further complicating AML compliance.
The current financial system, which claims it protects retail investors, often does so at the expense of individuals’ financial freedom. Banks demand justification for transactions of a decent size. This is an intrusion that contradicts the core promise of peer-to-peer electronic cash, as envisioned by Satoshi Nakamoto: to eliminate unnecessary intermediaries.
The challenge for stablecoins and the broader blockchain ecosystem is finding the elusive middle ground: achieving massive adoption while preserving fundamental civil liberties.
The flaws of AML/KYC
The regulatory side of digital assets is critical for large-scale adoption. Regulators are there to protect the public, but the systems they oversee are deeply flawed and ill-suited for the digital age.
The traditional financial system’s approach to AML is inherently inefficient. Consider Suspicious Activity Reports (SARs): Tens of thousands are sent, yet few are ever read. They are a box-ticking exercise — a massive, inefficient cost burden that does little or nothing to effectively fight financial crime.
The surveillance conundrum
The primary surveillance risk stems from centralization. Most compliant stablecoins rely on centralized issuers who conduct rigorous KYC assessments on every participant, mirroring the traditional bank model. This creates a single point of failure — a massive honeypot of personal data — and a gatekeeper who can monitor, question or freeze funds based on regulatory pressure.
While the crypto world was built on anonymity, this is incompatible with the regulatory demands of large-scale institutional adoption. This disconnect persists because the regulatory side has not kept pace with blockchain innovation.
The problem isn’t the need for compliance but the lack of programmable logic at the foundational layer. If money were smart and if a transaction could execute only upon meeting specific mandated regulatory boundaries, the invasive, post-facto surveillance apparatus would vanish.
To truly unleash the potential of stablecoins, we must develop a “civil liberties-compatible” system. This system must ensure regulatory compliance while protecting the user’s right to transactional privacy and financial freedom. This requires addressing three core pillars.
Foundational security is key
Every major hack links back to a flaw in an application’s smart contract. The underlying Layer 1 blockchain has never been hacked. For a secure, compliant stablecoin system, core logic must be baked into the protocol layer.
Related: Crypto executives share 6 stablecoin predictions for 2026
Compliance should be a function of the money itself, not a brittle application built on top. Regulations, like geofencing, should be implemented at the protocol level. The transaction logic should be binary: Comply with the programmed regulatory boundaries and go through instantly, or fail. This eliminates the need for vast compliance teams wading through countless SARs.
Blockchain needs to be used, not understood
The greatest barrier to mass adoption isn’t regulation; it’s the technology itself. We are still asking everyday users to understand the Byzantine complexity of a blockchain. Blockchain should be used, not understood. The solution lies in abstracting away this complexity. If I pay for a coffee, I don’t think about the traditional payment rails — I just tap and go.
Compliance should occur once at the wallet or identity level. A user undergoes a single KYC verification, which attaches attested, privacy-preserving attributes to their digital identity. This verified identity enables users to interact freely. The goal is simple: Prove that I am over 18 without disclosing who I am. This is the essence of true digital privacy: proof of compliance without disclosure of identity.
Regulators need to set frameworks
Regulators are perpetually behind the innovation curve. The only way to drive adoption that forces regulatory clarity is to create solutions that address immediate, multibillion-dollar problems for major financial players. If a solution arrives at the table of Jamie Dimon or Larry Fink and drastically reduces their compliance burden, they will adopt it. When major players like Morgan Stanley or BlackRock move, they compel global regulators to align the framework.
Tokenization of assets, like money market funds, is a perfect first step. Proving compliance at the protocol layer facilitates true peer-to-peer exchange for both simple payments and complex multibillion-dollar trade finance deals.
The path forward
Stablecoins represent an incredible opportunity to fix a broken financial system, but only if they avoid becoming a Trojan horse for enhanced, intrusive surveillance. The goal is to restore financial freedom while building compliance into the structural code.
The technology is ready for shipment. This win-win-win scenario lowers costs for institutions, ensures regulatory compliance and protects individuals’ privacy. To evolve beyond the “smelly T-shirt cyberpunk” fantasy, we must be realists. The world won’t budge on compliance.
Our task is clear: Build a digital infrastructure where money is intelligent, compliance is automatic, and financial freedom is the default. Only then can stablecoins fulfill their promise as the next generation of global electronic cash.
Opinion by: Boris Bohrer-Bilowitzki, CEO of Concordium.
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