Trillions in stablecoin flows but almost zero privacy as Aleo’s latest report exposes massive crypto paradox

Over the past two years, institutional players transacted approximately $1.22 trillion in stablecoins on public blockchains, yet virtually none of that capital was shielded from public view.

This, along with several other eye-opening findings (amidst several others), was part of privacy-focused blockchain platform Aleo’s new Stablecoin Privacy Gap Report (2025).

The report, which tracked labeled crypto players like Wintermute, Copper, and Ceffu, revealed that an average of about $50.8 billion per month in on-chain stablecoin transfers was being facilitated by institutional entities; however, over the last 24 months, only a microscopic $624 million of this figure was being moved via privacy protocols (approx. 0.05% of the total).

Even more notably, none of the “private transactions” could be attributed to the institutions studied. In other words, the biggest crypto traders and enterprises in the world seem to be settling billions of dollars in the open, turning every transaction into market-moving intel. 

Transparency, the double-edged sword nobody wants to talk about

By having fully transparent settlements as the norm, it means every large transfer is broadcast to the world, allowing competitors and adversaries to glean sensitive insights from counterparties, including their treasury operations, timing of payroll or vendor payments, etc.

To this point, the report revealed how a prominent crypto trader, James Wynn, allegedly suffered a $100 million loss thanks to a coordinated liquidation attack, a scheme that was abetted by on-chain data revealing his positions and liquidation thresholds.

As per Aleo’s research team, observers tracked Wynn’s movements in real time, further noting that if the trades had been executed privately, the outcome might have been different. 

Beyond market tactics, Aleo’s findings also revealed a host of physical security risks as well, with criminals recently targeting crypto holders for kidnappings and extortion (including Ledger co-founder David Balland and his partner) by exploiting knowledge of their on-chain wealth. 

Closing the stablecoin privacy gap

Fortunately enough, the report noted that the tools needed to fix this imbalance seem to have finally arrived, with the concept of ‘selective disclosure’ having gained immense traction recently, allowing transactions to be encrypted on public ledgers by default, while still allowing authorized parties (auditors, regulators, compliance teams) to access necessary details on demand. 

In practice, this allows for the facilitation of confidential transfers that preserve privacy for the public, but come with cryptographic proofs or viewing keys to satisfy compliance.

Alluding to the rapid adoption of this technology, Aleo highlighted the ‘Privacy Pools Project,’ an evolution of Tornado Cash’s ideas as an implementation of the same.

To elaborate, the platform introduces association sets and zero-knowledge proofs (ZKPs) of provenance to allow compliant private transfers. 

Furthermore, Aleo also highlighted professional-grade privacy solutions on Ethereum, including EY’s Nightfall upgrade for enterprise transactions and the Aztec network’s privacy-focused L2.

The market’s alignment behind these solutions was bolstered by data showing major stablecoin issuers and fintech firms adopting these technologies at a rapid rate.

The privacy revolution is underway, in full swing!

In October, Aleo partnered with regulated issuer Paxos to launch USAD, a USD-denominated stablecoin with end-to-end encryption on Aleo’s network, essentially a selectively private stablecoin designed for institutional payroll and treasury use cases.

The idea was to give enterprises a way to settle in dollars on-chain without broadcasting every payment detail to competitors. 

Early signals suggest that, as such privacy-preserving rails have gone live and gained traction, adoption seems to be shifting from a “pixel” of activity to a “legible slice” of the market’s overall stablecoin volume.

In fact, the Aleo team noted that it may only take a modest uptick in usage to move billions of dollars into private settlement, given the already massive scale of institutional flows. 

To this point, the report states that institutions have already routed over $1 trillion via public stablecoins, and initiatives like PayPal’s PYUSD or the Global Dollar Network hint at even broader on-chain adoption ahead.

Venture firm a16z’s recent analysis went as far as calling privacy “a prerequisite for wider adoption” of crypto, even though actual institutional usage of privacy tech today remains near zero.

Aleo’s report echoed this sentiment, arguing that once confidentiality and compliance start to coexist more seamlessly with one another, it will only be a matter of time until a new standard for how value moves on-chain is established (akin to what HTTPS did for the internet decades ago, i.e. encryption didn’t make the web any less useful or compliant, it simply made it “safe enough for money). 

Looking ahead, technologies like selective disclosure and private stablecoins could turn today’s trillion-dollar transparency paradox into tomorrow’s norm of private, secure digital finance.

Interesting times ahead!

The post Trillions in stablecoin flows but almost zero privacy as Aleo’s latest report exposes massive crypto paradox appeared first on Invezz