Paper 2026/872

Privacy Coins Under Viewing Key Compromise

Abstract

Anonymity guarantees of privacy-oriented cryptocurrencies are garnering negative attention from lawmakers who view them as antinomic to accountability. Having recognized their potential for innovation, however, regulators may not want to outright ban privacy coins but instead seek a middle ground where financial oversight is effective, and still a modicum of privacy is maintained. Mature designs, such as Zcash, Monero, or Firo, facilitate this through so-called viewing keys that can be disclosed to third parties for the purpose of supervision. This paper initiates the study of the issues of security, privacy, and fungibility that privacy coins face in the non-custodial setting with the legal obligation on users to surrender their viewing keys to the authorities. In doing so, it fills the gap in provable anonymity guarantees for Zcash, while, at the same time, exposing problems with Monero and Firo.