# Why regulated institutions cannot use a transparent ledger

> Why regulated institutions cannot use a transparent ledger: The demand side, which is usually left out of the debate. Region: Global.

Part of the Soda Labs Privacy Hub regulation map, which reads the instruments
themselves rather than summarising the summaries: https://www.sodalabs.xyz/privacy-hub/regulation

## Key facts

- Entry type: Where privacy tech meets the rulebook
- Region: Global
- Subject: The demand side, which is usually left out of the debate
- Tags: front-running, commercial confidentiality, permissioned networks, demand side
- Canonical page: https://www.sodalabs.xyz/privacy-hub/regulation/why-institutions-need-it

## What it actually says

The compliance debate usually asks whether institutions are permitted to use confidentiality. The prior question is whether they can function without it. An institution operating on a fully transparent ledger publishes its order flow, inviting anyone to trade ahead of it; its counterparty set and exposures; its treasury positions; its payroll; and its clients' commercial terms. Where counterparties are people, it also publishes personal data that data protection law obliges it to minimise. No regulator asks for any of this. Public visibility is a property of the ledger, not a supervisory requirement, and the two are constantly confused. The revealed preference shows up in architecture: institutional settlement has concentrated on permissioned networks whose main selling point is that only the transacting parties see the trade.

## The instruments that matter

- **Order flow and positions**: a public ledger publishes trading intent ahead of execution, and counterparty exposures continuously
- **Commercial and personal data**: payroll, client terms and counterparty identity, which the institution is separately obliged to minimise under data protection law
- **No rule requires it**: no supervisor anywhere asks a bank to publish its balances to the public; the transparency is an artefact of the ledger, not a regulatory demand

## Sources

- [Kinexys and MIT DCI on public blockchains for regulated institutions](https://www.jpmorgan.com/payments/newsroom/kinexys-mit-dci-public-blockchain-adoption)

## Related entries

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- [Central banks are building confidentiality themselves](https://www.sodalabs.xyz/privacy-hub/regulation/why-central-banks-build-privacy): What the people writing the rules do when they design money
- [Erasure against an append-only ledger](https://www.sodalabs.xyz/privacy-hub/regulation/why-erasure): The one collision with no clean answer yet
- [Proving where funds did not come from](https://www.sodalabs.xyz/privacy-hub/regulation/why-privacy-pools): Association sets, and the Tornado Cash aftermath
- [Sanctions screening on a confidential ledger](https://www.sodalabs.xyz/privacy-hub/regulation/why-sanctions-screening): The genuinely open problem
- [Selective disclosure as a compliance primitive](https://www.sodalabs.xyz/privacy-hub/regulation/why-viewing-keys): Bilateral disclosure versus publishing to everyone