Recently, I delved into an interesting phenomenon: when discussing the future of Web3 finance, the most common narrative revolves around the contradiction between privacy and compliance. Some put it more bluntly: over the past decade in the crypto world, technological progress has been rapid, with numerous advanced cryptographic algorithms and increasing ways to put assets on-chain. But the real bottleneck has always been this one issue—how to find a long-term, workable balance between privacy protection and global regulatory requirements.

This is not about pursuing "absolute anonymity," nor about "passively waiting to be compliant," much less a binary choice of "sacrificing privacy for compliance or vice versa."

The actual problems that need solving are more specific:

- How should ordinary users protect their financial privacy—this is a fundamental right.
- How can institutional investors and large capital providers meet various regulatory frameworks across different countries—this is a practical constraint.
- When assets circulate on-chain, how to ensure security, maintain efficiency, and leave traceable records—this is a technical requirement.

Ultimately, Web3 finance should no longer be in opposition to traditional finance but should serve as a beneficial complement.

In simpler terms: what Web3 finance fundamentally lacks is not more fancy privacy technologies or more compliance documents, but a new trust paradigm—one that allows privacy and compliance to coexist and support each other, rather than pulling in opposite directions.

From this perspective, few projects in the market are addressing this issue systematically. But there is a network that is answering this question in a comprehensive way—its name is Dusk. This project demonstrates a relatively complete approach: how to break the seemingly irreconcilable contradiction between privacy and compliance and establish a trustworthy foundation for healthy development of Web3 finance.

**The Key Issue: The "Zero-Sum Trap" of Privacy and Compliance**

Over the years, Web3 finance has been caught in a tug-of-war between privacy and compliance. The dilemma is clear—

One approach is to follow the path of Monero and similar projects: completely private transactions where sender, receiver, amount, and flow are all encrypted and hidden. It sounds great—maximizing user privacy. But the problem is, such an approach makes KYC (Know Your Customer), AML (Anti-Money Laundering), and other regulatory requirements impossible to meet. Traditional financial institutions stay far away, and compliance departments dare not touch it.

The other approach is the opposite: fully transparent on-chain, with all transaction data and account information publicly accessible. This solves compliance issues but exposes user privacy entirely. Imagine every transaction, account balance, and fund flow being recorded on a public blockchain—what's the point of "financial privacy" then?

The current situation is that the Web3 finance space swings between these two extremes, making it difficult to find a viable middle ground. Projects, users, and regulators are all dissatisfied and searching for breakthroughs. Moreover, this is not just a technical issue but an ecosystem problem—without good solutions, mainstream financial institutions and large capital providers remain hesitant to participate in Web3 finance.

**Dusk’s Approach: A Symbiotic Framework for Privacy and Compliance**

Interestingly, Dusk starts from a different premise. Instead of choosing a "compromise" point between privacy and compliance, it designs a mechanism that enables both to coexist and complement each other.

From a technical architecture perspective, Dusk employs a scheme called "Privacy Proofs"—the key is in the "proof" aspect. What does this mean? It means your transaction details can remain confidential (private from the outside), but you can also present encrypted proofs to regulators or authorized entities demonstrating that your transaction is compliant.

For example, suppose you want to make a large transaction. You don’t need to reveal the counterparties or amounts (thus protecting privacy), but you can provide a cryptographic proof to regulators showing that "this money does not originate from blacklisted accounts and does not violate sanctions lists, complying with AML requirements." Regulators can verify your compliance using this proof without seeing the specific transaction data.

The benefits of this design are immediately apparent:

- Users’ financial privacy is substantively protected—transaction details are not exposed publicly.
- Regulatory requirements are met—compliance can be verified and traced.
- Institutions can participate with confidence—they can prove their compliance, reducing regulatory risk.
- On-chain asset circulation is secure, efficient, and traceable—especially important for RWA (Real-World Assets) on-chain.

**New Imagination for RWA Implementation**

This framework is particularly meaningful in the RWA domain. The core challenge of RWA is how to enable real-world assets (such as bonds, real estate, accounts receivable) to circulate safely and efficiently on-chain while satisfying various regulatory requirements across jurisdictions.

Traditional solutions involve transparent on-chain data, exposing sensitive business information (like financial status or counterparty details). No enterprise is willing to do that.

Dusk’s privacy mechanism changes this situation. A company can issue RWA tokens on Dusk, conduct transactions in a privacy-preserving environment, and submit compliance proofs to relevant regulators. Business-sensitive information remains protected, but the regulatory chain remains intact.

This opens the door for RWA to move from concept to practical application. Large assets—such as corporate bonds, receivables, asset-backed securities—that are stuck in traditional finance could find new on-chain circulation pathways.

**A New Pattern for Web3 Finance**

If this framework proves successful, the entire Web3 finance ecosystem will transform. It will no longer be just a niche for crypto enthusiasts but could become a genuine supplement to traditional finance—offering higher efficiency, more flexible market participation, while maintaining privacy and compliance.

Regulators will no longer need to choose between "completely banning" and "completely deregulating." Institutional investors won’t have to stay away due to compliance risks. Ordinary users won’t have to helplessly choose between "financial privacy" and "regulatory constraints."

This is the true future of Web3 finance—not about overthrowing the existing financial system but about finding new possibilities within the current framework, using technology to solve long-standing frictions. What Dusk is doing is precisely that.