Since the seed of an idea around a cryptographically linked chain of blocks first emerged, blockchain has come a long way. Today, the tech is being used in many use cases, but it’s in financial services where it is being adopted at scale, and ticking a lot of the boxes it promised early on.

For example, BlackRock used JP Morgan Chase’ Tokenized Collateral Network (TCN) to tokenise shares in one of its money market funds, which were then sent to Barclays as collateral for an over-the-counter (OTC) derivatives trade between the firms. This transaction, which used a private blockchain on JP Morgan’s platform, now called Kinexys, demonstrated the greater efficiency and stability which blockchain can offer.

When it comes to banking and finance though, which is still arguably the most compelling case for blockchain, there is something still missing. Yes, it can remove friction, cut delays, and streamline processes – but for most in the sector, the lack of confidentiality is a clear dealbreaker.

Unlike traditional systems, public blockchains expose everything by default. Wallet balances, transaction histories, and counterparties are visible to anyone – meaning every deposit, loan, and withdrawal can be scrutinised. This transparency may not faze retail crypto traders, but for private banks and their clients managing significant capital, it’s a huge problem. It could be a bank conducting a discreet client trade, a hedge fund managing sensitive portfolios, or wealth managers handling confidential transactions, whatever the case, exposing financial details risks breaching client privacy and completely undermining any competitive advantage.

Growing demand for privacy-preserving technologies

With the above risks simply not acceptable in banking, many potential blockchain use cases in finance are either being shelved or remain in experimental stages.

But that’s starting to change. Apple, IBM and a wave of privacy-focused blockchain projects are making headlines, seeing demand build across the finance world for privacy-preserving technologies. Tech that can enable confidential, scalable, and compliant onchain financial applications – without compromising performance, compliance, or auditability. Tech that can redefine how confidentiality is handled in the blockchain and, ultimately, in all of cloud computing. Tech that sits in the field of Fully Homomorphic Encryption (FHE).

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Put simply, FHE is a privacy-preserving technology that enables data to be processed without ever decrypting it – meaning that sensitive information remains encrypted even while in use. In other words, it’s an encryption technique that allows you to have confidentiality on top of public blockchains.

Cryptography as a field may be very obscure and opaque, but the use cases it enables are very obvious once it actually works, including:

Secure transaction processing, risk modeling, and confidential onchain payments, making blockchain technology suitable for financial institutions.
All data in transactions is end-to-end encrypted and never exposed, shielding sensitive financial data from competitors, counterparties, or the public.
Smart contract states are continuously updated, while remaining fully encrypted, which allows integration of wealth products, structured investments, and settlement processes on-chain while preserving both composability and privacy.

Overcoming barriers to FHE adoption

While the benefits are clear, FHE is not yet fully adopted across blockchain as of now, and the reason for that is simple: historical barriers around performance and accessibility.

However, with demand rising by the day, there is a real drive on getting this technology into real-world products and work to actively addressing the core challenges that have historically held back FHE adoption is underway, such as:

Speed: FHE technology is considerably faster than it used to be thanks to recent advancements, and is now capable of supporting most onchain payment use cases. The expectation is that FHE will also be 100x more scalable in the coming years, allowing it to address the most demanding onchain applications.
Hardware integration: Using GPUs opens the door to scaling to hundreds of transactions per second, and work towards a dedicated chip to accelerate FHE further and reach tens of thousands of transactions per second is ongoing right now.
Developer usability: Using FHE no longer requires learning new programming languages. Instead, developers can use Solidity and other existing languages, and deploy their applications on their preferred chain.

Up until now, the only way to use a blockchain was to disclose everything to everyone. But at the current rate of development and more of finance moving onchain by the day, the prospect of executing complex transactions with full confidentiality, regulatory compliance and institutional-grade performance could be sooner than many think.