Data Breach at America's Three Largest Banks! Ethereum Co-founder Vitalik Criticizes Privacy Erosion

Ethereum co-founder Vitalik Buterin stated that privacy is not a feature, privacy is a hygiene practice. He made this comment as the US’s three largest banks suffered a data leak stemming from unauthorized access to the SitusAMC system, exposing data including accounting records, legal agreements, and customer-related information. As public concern over privacy continues to rise, privacy-focused projects like Zcash are drawing increasing attention.

Data Breach at the Top Three US Banks, Vitalik Proposes Privacy Hygiene Theory

On Saturday, SitusAMC confirmed that a threat actor had stolen data related to multiple major financial institutions. The company stated that the leaked data included “accounting records and legal agreements” as well as “certain data related to customers of some of our clients,” while the scope, nature, and extent of the data breach are still under investigation. This leak prompted Vitalik to argue that privacy should be seen as a fundamental digital “hygiene,” not an optional extra.

As a mortgage technology provider serving top US banks, SitusAMC’s systems being compromised has a far-reaching impact beyond a single institution. This supply chain attack model has become increasingly common in recent years: attackers bypass the well-defended major banks and instead target third-party vendors with weaker security as entry points. Once they infiltrate a vendor’s system, attackers can access all client data, resulting in a “one-to-many” attack effect.

Vitalik’s response points to a broader argument he’s been making this year: privacy is a basic requirement for digital systems, not an add-on. Comparing privacy to “hygiene” is a highly insightful redefinition. Just as we don’t regard handwashing as an optional luxury but as a basic health habit, privacy protection should be a standard feature of digital life, not a special perk for high-end users.

“Calling privacy a ‘hygiene practice’ is a useful redefinition,” Boundless CEO Shiv Shankar told Decrypt. Shankar added that privacy “should be treated like server patching or key rotation: routine, non-negotiable, and built into infrastructure, not a premium feature added later.”

This perspective challenges the tech industry’s long-standing approach to privacy. Many platforms treat privacy features as paid upgrades or complicated settings, implying privacy is only for a select few who need or can afford it. Vitalik’s “hygiene theory” argues that privacy should be default and universal, just as public spaces must provide basic hygiene facilities.

Ethereum Advances Protocol-Level Privacy Solutions

In an article published in April, Vitalik outlined a roadmap for Ethereum to support stealth addresses, selective disclosure, and application-level zero-knowledge tools, aiming to reduce the structural data exposure common in traditional finance and public blockchains. As the largest smart contract platform, Ethereum’s public and transparent nature ensures verifiability but also creates privacy challenges: all transactions, balances, and contract interactions are publicly accessible.

In October, the Ethereum Foundation launched a new privacy-focused cluster and released initial details on Kohaku. Kohaku is a privacy-centric browser wallet and software development kit, developed by Nicolas Consigny and Vitalik, and was unveiled last week at the EFDevcon conference in Argentina. The new cluster brings together 47 researchers, engineers, coordinators, and cryptographers, led by Igor Barinov, founder of Blockscout and Gnosis Chain.

Ethereum Privacy Technology Development Roadmap

Stealth Addresses: Allow recipients to use one-time addresses, making transactions untraceable to real identities

Selective Disclosure: Users can choose to reveal specific information to specific parties, rather than all or nothing

Application-level Zero-Knowledge Tools: Enable dApps to verify conditions without exposing underlying data, such as verifying age without revealing a birthdate

Kohaku Wallet: Integrates privacy features into an easy-to-use browser wallet, lowering the barrier to entry

“Default privacy ensures everyone automatically benefits from strong cryptographic protection, without needing to understand complex tools or consciously make privacy decisions for every transaction,” Quinten van Welzen, Strategy and Communications Lead at privacy-focused L1 blockchain Zano, told Decrypt. This “default privacy” concept is fully aligned with Vitalik’s “hygiene theory”: privacy protection should happen automatically, not require users to enable it manually.

Major Blockchains Race for Privacy

As privacy becomes a principle and privacy-preserving technologies gain renewed attention across major chains, this shift is evident. Ethereum is advancing protocol-level tools and developing new privacy Layer 2 chains; Bitcoin is working on Taproot-enabled upgrades and wallet-based approaches; Solana is integrating around Light Protocol after early projects like Elusiv wound down.

Bitcoin’s Taproot upgrade, activated in 2021, enhances privacy by making complex multi-signature transactions indistinguishable from regular transactions. Additionally, wallet-based privacy methods such as CoinJoin (mixing transactions among multiple users) and PayJoin (two-party collaboration to obfuscate transaction structure) are under ongoing development. Solana’s Light Protocol focuses on providing a privacy layer for high-speed blockchains, using zero-knowledge proofs to protect transaction details without sacrificing performance.

Zcash is also receiving attention as a privacy-focused cryptocurrency that allows users to choose between transparent and fully shielded transactions. Fully shielded transactions use zero-knowledge proofs to hide sender, receiver, and transaction amount. Last week, a Nasdaq-listed treasury company increased its holdings of ZEC, driving its price up 469% over the past month. This surge reflects the market’s reevaluation of privacy technologies, especially against the backdrop of frequent data breaches in traditional financial systems.

Zcash’s technical advantage lies in its selective privacy model. Users can choose transparent transactions (like Bitcoin) or shielded transactions (fully anonymous) based on their needs. This flexibility allows for compliance (transparent transactions for auditing) while protecting privacy (shielded transactions prevent surveillance). As regulators’ attitudes towards privacy coins become clearer, this balanced model may become mainstream.

Satoshi’s Privacy Vision and Contemporary Challenges

However, the principle of privacy has been embedded in cryptocurrency since its inception, especially in its relationship with traditional finance. “We have to trust banks to hold our money and transfer it electronically, but they lend it out in credit bubbles with barely a fraction in reserve,” Bitcoin’s pseudonymous creator Satoshi Nakamoto wrote in 2009. “We must trust them with our privacy, trust them not to let identity thieves drain our accounts.”

Satoshi’s words are especially prescient in light of today’s bank data breach events. The traditional financial system is built on trust: users must trust banks to protect their funds, privacy, and data. However, the SitusAMC incident shows that this trust is fragile. Users have no control over which third-party vendors their bank chooses, nor can they audit these vendors’ security practices; they can only passively accept the risk.

Cryptocurrency offers an alternative paradigm: trustlessness, with security and privacy achieved through cryptography and decentralization. In this paradigm, users hold private keys to control assets, and use zero-knowledge proofs to protect privacy, without relying on the integrity or competence of any centralized entity. This is precisely the technical foundation of the “privacy hygiene” advocated by Vitalik.