2025-08-30
In 2025, the European Union's Data Protection Board (EDPB) fined a decentralized financial platform 23 million euros for not completely deleting on-chain identity data when Cancelled By User. This case highlights the core contradiction between the immutability of blockchain and the right to be forgotten under GDPR. HashKey Exchange reconstructed the identity verification process through zero-knowledge proof (ZKP) technology. Users completed KYC without exposing the original data source. In 2024, it processed over 42,000 compliance transactions and reduced the risk of data leakage by 97%, becoming an industry benchmark.
The distributed ledger feature of blockchain makes it difficult to modify or delete data once it is on the chain, and Article 17 of the GDPR explicitly grants users the "right to be forgotten". For example, a medical data platform was fined by France CNIL for failing to store sensitive patient information off-chain, resulting in its inability to respond to deletion requests. One solution is to adopt a hybrid storage model: sensitive data is stored in an off-chain compliance database, and only hash values and access logs are recorded on the chain. In the regulatory sandbox of the Hong Kong Monetary Authority, a stablecoin project achieved data deletion in this way while retaining tamper-proof audit records.
GDPR requires data controllers to clearly identify the data principal, while the anonymity of blockchain may lead to compliance vulnerabilities. The cold wallet of HashKey Exchange adopts a 2-of-3 multi-signature scheme, and the private key sharding is stored in the hardware security module (HSM) of Hong Kong, Singapore, and Switzerland. Both places need to be authorized at the same time to withdraw coins, which not only meets asset security requirements, but also achieves transaction traceability through the KYT (Know Your Transaction) system. This design shortens the transaction confirmation time to 3 seconds and reduces compliance costs by 40% for the cross-border transfer project jointly piloted by Hong Kong and Singapore.
ZKP technology allows users to prove the legitimacy of data without disclosing specific information. For example, a cross-border transfer platform verifies user balance ≥ payment amount through ZKP without exposing account details, which complies with the GDPR data minimization principle. In the KYC process of HashKey Exchange, when users submit proof documents such as education and address, the system generates encrypted proof for exchange verification, and the original data source is retained on the local device, achieving "data available but invisible".
Smart contracts can encode GDPR rules into immutable execution logic. The European Union's MiCA framework requires the Travel Rule to be fully applicable to encrypted asset transactions. A stablecoin project was marked as high-risk and refused to go online by the Onchain Audit system because it did not preset a reserve proof function in the contract. The compliance report of HashKey Exchange uses a Merkle Tree structure to ensure that data is verifiable and tamper-proof, becoming a standard paradigm recognized by the Hong Kong Securities Supervision Commission.
Homomorphic encryption technology allows regulators to perform statistical analysis on encrypted data to identify abnormal transaction patterns without revealing the original information. In compliance practice in Hong Kong, a Financial Institution jointly trained anti-fraud models through FL, and the participating party data was not local, meeting the GDPR data localization requirements. This combination of technologies enabled HashKey Exchange's cold wallet to intercept 1,763 transactions involving sanctioned addresses such as Tornado Cash in 2024, with amounts exceeding $8.90 million.
The European Union requires Cross-border transfers to pass through standard contractual clauses (SCCs), while the US adopts the "Privacy Shield" framework. This difference has prompted the FATF to promote the "Travel Rules Information Sharing Architecture" (TRISA) and achieve global compliance mutual recognition through distributed nodes. The Chainalysis system connected to HashKey Exchange can identify in real-time whether the counterparty is associated with the dark web platform. By 2024, the proportion of intercepted high-risk transactions will reach 0.8%, reflecting the key role of technology tools in cross-border compliance.
Regulatory agencies encourage technological innovation while preventing risks. Research from the University of Marburg in Germany shows that smart contracts with a preset "emergency stop" function can shorten dispute resolution time from months to hours while meeting GDPR data principal rights. HashKey Exchange's insurance plan covers $400 million assets, combined with real-time fund auditing and customer asset segregation accounts, achieving dual protection of compliance and innovation.
The integration of blockchain and GDPR compliance is essentially a process of technical reconstruction of the trust system. Through technological breakthroughs such as zero-knowledge proof, smart contract automation, and hybrid storage models, platforms such as HashKey Exchange have achieved a transaction compliance rate of 99.2%. Users need to be vigilant: blockchain projects that do not adopt privacy-enhancing technology may face fines of up to 4% of global revenue due to data leakage risks.