Tackling Legal Uncertainty with the ZK Open Legal Working Group

We are excited to announce a brand new community-led initiative: the ZK open legal report and working group. In collaboration with 11 companies involved in the privacy and ZK space, we seek to create legal reports and resources, free to use and open to all. By identifying and mitigating the legal barriers relating to the implementation of ZK and privacy technologies, we can unleash their full potential and accelerate innovation in the ZK and blockchain space.

If this topic is important to you and your community and you would like to sponsor this initiative then get in touch by emailing susannah@zkvalidator.com

A selection of companies involved in the project.

The legal unknowns surrounding the cryptographic field of zero knowledge proofs (ZKPs) and privacy can deter project teams from using this technology. This impairs innovation and limits the talent pool to those most comfortable with this uncertainty and larger teams who are able to pay for extensive legal research. Notwithstanding, ZKPs have applications ranging from privacy to scaling, and represent a fundamental breakthrough for blockchains. Clarifying the legal situation around the use of ZKPs and privacy technology is urgently needed to enable this innovation.

The ZK Open Legal Working Group brings together expert teams working with ZKPs to pool information and resources around shared legal questions relating to the use of ZKPs. The outcome of our work together will be the production of a series of ZK-focused Open Legal Reports. These reports will be open source, shared resources accessible to individuals and teams of developers working with ZKPs. Creating these reports for the community will:

1. Offer clarity around the legal risks and opportunities that these technologies present.
2. Increase the number of high quality developers, researchers, and companies who feel comfortable implementing privacy preserving and zk-rollup applications on blockchains.
3. Accelerate the use of ZKPs across major blockchains

The initiative kicked off with an initial meeting mapping out the key legal concerns within the privacy and ZK space. The project roadmap is split into 4 distinct phases:

1. Establish the common concerns and questions shared by the majority of ZK-focused teams and present this in an initial report.
2. Create an EU focused report.
3. Extend the report to encompass UK and Canadian laws.
4. Draft a full comparative global report summarising all the research conducted.

The reports produced will summarise the existing legal challenges relevant for most projects in an accessible format. Solutions to these challenges will be presented in a practical and implementable way with care to include pretested legal solutions. Innovative solutions will also be suggested, which could be implemented on a global scale and recommendations will be provided through in-depth comparison of existing legislation, project policies and international best practices.

During the kick-off meeting, four key themes emerged with regards to privacy and ZKP legislation for blockchain systems.

1. The expectation around Know Your Customer (KYC) for ZK projects as well as how the use of ZK technology could potentially enable better information management in the KYC process.
2. ZKPs as a means for Data Protection: the recognition of certain aspects of ZKP technologies on the blockchain to meet some requirements under the General Data Protection Regulation, such as the minimisation principle.
3. Civil Liberties and restriction of ZK technology: to challenge restrictions on privacy preserving technologies and coins under the planned Markets in Crypto Assets (MICA) regulation.
4. Legal Responsibility: On which party — protocol designers, users, implementers, validators, etc. — does the regulatory and legal burden fall upon.

Our next step will be to evaluate which of these four themes should be explored in more detail and would provide the greatest initial benefit to the intended readers of the report. Following this, we would collect information relating to the common concerns and questions around the chosen theme. If you are interested in getting involved with the project or would like to sponsor the report then get in touch by emailing susannah@zkvalidator.com