A new “Privacy Gap Report” was published by the zero-knowledge proofs (ZKP) specialist, Aleo. The document warns about the security risks in stablecoin adoption. Aleo indicated that the lack of privacy in institutional transactions creates a “major disconnect” in the digital economy.
This is a major problem: the volume of stablecoin transactions reached $1.25 trillion last month, with institutional flows (like those from Wintermute) exceeding $68 billion. Despite these numbers, only 0.0013% ($624.4 million) of those flows used any form of private settlement. This transparency on chains like Ethereum allows observers to track movement patterns and trading strategies in real time.
Aleo warns that, without privacy infrastructure, “institutional adoption increases exposure rather than reducing it,” facilitating front-running and market manipulation. According to the report, the solution is the adoption of compliant, private settlement rails that are already emerging. Aleo projects that the industry could soon see a 2-5% shift (between $1 billion and $2.5 billion) toward private settlement to mitigate these risks.
Source: https://aleo.org/privacy-gap-report-2025/
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