The European Union (EU) is taking an important step towards controlling how personal data is stored and accessed on the blockchain. The new guidelines from the European Data Protection Board (EDPB) are attracting significant attention as they propose strict limits to ensure blockchain technology does not violate the General Data Protection Regulation (GDPR).
This move is creating a wave of controversy, with one side being experts who see this as necessary to protect users, and the other side arguing it could stifle innovation and threaten the decentralization of blockchain.
EDPB wants to "brake" personal data on the blockchain
In the recently approved draft guidance, #EDPB emphasized that storing personal data directly on the blockchain should be minimized, especially when it conflicts with GDPR data protection principles.
The document emphasizes:
Blockchain has immutable characteristics – making it nearly impossible to edit or delete data.
This contradicts basic individual rights under GDPR, such as the right to data deletion ("right to be forgotten") or the right to correct inaccurate information.
EDPB recommends organizations using blockchain should:
Design data protection systems from the early stages (Privacy by Design).
Avoid sharing personal data with an undefined number of people – something public blockchain often does.
Prioritize storing sensitive data off-chain combined with encryption or privacy-preserving solutions like zero-knowledge proofs.
What do the new regulations mean for blockchain and crypto?
This guidance, if officially applied, will create a new standard for data governance for blockchain projects operating in Europe. In particular, Web3, DeFi, or layer-1 blockchain projects related to personal data such as digital identity, health, or KYC will be the most heavily impacted.
EDPB requests organizations:
Conduct a Data Protection Impact Assessment (DPIA) before implementing blockchain that processes user data.
Clarify the role of each party in the data processing chain, from transaction validators, developers to wallet service providers.
Debate erupts: "Protecting privacy" or "undermining decentralization"?
Experts are divided into two contrasting opinions on the new regulations:
🔸 Support:
Bryn Bennett – an expert from Web3 security company Hacken – believes this is a reasonable step:
Decentralization does not mean exemption from the law. If user data is neglected, projects will face both legal risks and security attacks. Privacy-by-design is not just a standard – it is a vital condition.
🔸 Opposition:
Harry Halpin – CEO of Nym Technologies – has once again raised concerns:
"Putting personal data on the blockchain is a mistake. Applications like COVID passports or digital identity systems threaten privacy and are easily abused by authorities."
He argues that applying GDPR laws to blockchain could force decentralized networks to modify or censor data – which goes against the immutable nature of blockchain.
"If forced to support data deletion on the blockchain, it would be better to use a centralized database."
Impact on Binance users and the crypto market
If implemented, the new EU regulations could cause a major wave of adjustments throughout the entire crypto ecosystem, not only in Europe but globally.
For Binance users, KYC services, identity management, or wallet data storage need to be reviewed to ensure compliance with EU laws, especially if related to European residents.
Blockchain projects deployed on Binance Smart Chain also need to pay attention to redesigning data architecture, avoiding storing personal information directly on-chain if they want to access the EU market.
At the same time, this is also an opportunity for projects specializing in privacy and data protection like Nym, Aztec, or Aleo – names that could benefit if the trend of "privacy-by-design" becomes a global standard.
Conclusion: Blockchain must adapt, it cannot stand outside the law
The EU's issuance of guidelines tightening privacy on the blockchain reveals a clear reality: no matter how advanced the technology is, personal interests remain the top priority for lawmakers.
It is important for the blockchain industry to learn how to adapt to regulations rather than trying to push back. Only by doing so can we promote sustainable innovation, ensuring both decentralization and privacy for users.
Risk warning
Investing in cryptocurrency always carries high risks and is not suitable for everyone. Please consider carefully before participating and do not invest money you cannot afford to lose.
