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Privacy and decentralised identification have become key issues in the bitcoin business as it heads into 2026. As governments, big tech companies, and blockchain developers all work on digital identification systems, they are raising important questions about privacy, self-sovereignty, and individual rights in a world that is becoming more connected.
Vitalik Buterin, one of the co-founders of Ethereum, has long argued that privacy is a key part of decentralised systems. He recently said again that the goal is not just to create walled gardens managed by centralised corporations, but to “onboard people to openness and self-sovereignty.” With zero-knowledge proofs (ZKPs) and selective disclosure becoming more popular, crypto is a privacy-first alternative to state-backed digital IDs and companies that hoard data. But as countries move forward with CBDCs and surveillance tools, it’s more important than ever to protect people’s freedom in the digital era.
In 2025, this tension was quite clear. Decentralised identity schemes grew as people became more angry about centralised surveillance. More than 750 privacy-focused projects are based on Ethereum alone. These projects range from anonymous payments to verified credentials to selective disclosure, which lets users confirm things like their age or eligibility without revealing their full identities. Buterin’s writings, such as a June essay that warned against using permanent on-chain IDs that may be used to track or force people to do things, show how dangerous it is to put all of your identity into one place. He supports attribute-based verification through ZKPs, which show that statements are true without giving away the data that supports them. This is a system that strikes a good compromise between usability and strong security.
Ethereum as a Place to Test Privacy
Ethereum became the main place for privacy innovation in 2025. The October discussion on the network talked about how deep the ecosystem is and praised tools that focus on human identity over only anonymity. People in the community, like the people behind The Book of Ethereum account, called this a “unfolding reality,” not a far-off dream. In December, Buterin suggested that Elon Musk use ZKPs on X to check that algorithms are fair, which added to the story.
Things moved quickly: The Privacy Cluster, a group of 47 people directed by Igor Barinov, worked together on private transfers, private proving, and institutional task groups. Kohaku, which was shown off at Devcon, added a wallet framework that makes privacy the default setting.
Upgrades like Fusaka (December 2025) made it easier to scale and use ZKP in real life. These changes meet genuine needs, including keeping metadata from leaking in RPCs or letting people use DeFi privately without fully exposing themselves.
Enterprise usage rose too: Hashgraph Group’s IDTrust on Hedera launched in August as a self-sovereign platform for governments, employing agentic AI for verifiable credentials. Concordium’s mobile app made it possible to check someone’s age using ZKP for UK compliance, verifying uniqueness without using personal data.
Discussions about Proof of Personhood and Biometrics
There were improvements to proof-of-personhood systems, and Sam Altman’s World ID is still one of the most popular ones. The protocol uses iris scans to check for uniqueness and encrypts and deletes data after the process. Its goal is to stop bots while protecting privacy.
However, critics like Edward Snowden raised concerns about coercion and the centralisation of biometrics. In 2025, some countries, like the Philippines stopped because of concerns about data.
Buterin responded with pluralistic IDs, which are multiple, decentralised verifiers (social, governmental, biometric) that protect against single failures. This method avoids the problems with World ID and encourages pseudonymity, which is important for free speech.
State Surveillance versus Decentralised Options
Governments’ digital IDs make differences even bigger. The changes to Switzerland’s OSCPT, which expanded monitoring to include communications and VPNs, caused outcry and led Proton to stop investments and send $100 million outside. The Council of States later limited expansions, but the damage stayed, showing how fragile privacy is.
In the UK, Concordium’s app allowed ZKP age checks even though proof was required. Google’s Wallet added ZKPs for age verification and made libraries available to third-party services, making crypto technology more common. Wallet now has more digital IDs from U.S. states, and ZKPs are used for selected proofs.
These Big Tech moves take ideas from crypto but centralise control, which goes against the idea of decentralisation. Bhutan’s national ID based on Ethereum, which was launched with Buterin’s help, is an example of a country using self-sovereign principles.
Outlook for 2026
As we go towards 2026, privacy mechanisms like ZKPs and DID could help crypto become more popular. With stablecoins worth $300 billion and RWAs aiming for $2 trillion by 2028, selective disclosure lets people do private finance that is still legal—opening up institutional flows without being watched. Buterin’s Kohaku and PSE plan show that Ethereum is serious about its goals, which might put it ahead in private DeFi and identification.
There are still problems to solve, such finding a balance between AML and anonymity, making ZKPs more affordable, and stopping the government from going too far. As Lagarde pushes for laws on the digital euro, crypto’s privacy-first options, such World ID’s uniqueness and Ethereum’s pluralistic frameworks, act as counterweights.
For users, this merging implies they have a choice: centralised ease or decentralised freedom? 2026 may decide if crypto stays open as digital IDs become more common.
Final Thoughts
The future of crypto in 2026 depends on the success of privacy and decentralised identity. Buterin’s support, Ethereum’s 750+ projects, and new ideas like IDTrust/Concordium are pushing back against surveillance trends from Switzerland to Google. As CBDCs get closer and Big Tech starts using ZKPs, selective disclosure becomes crypto’s edge—showing features without revealing them. Decentralisation spreads power, protecting self-sovereignty in a society that is moving towards digital IDs. Watch the laws and adoption; privacy isn’t a choice—it’s what crypto is all about.
