Blockchain and Financial Privacy – Balancing Transparency and Data Protection in Blockchain Based Financial System

Blockchain technology has been an important technological development in the financial sector. Its capacity to create distributed, verifiable and tamper-resistant records has led to its applications in digital payments, securities settlement, financial asset management, smart contracts, digital identity and virtual assets. However, blockchain's characteristics also raise substantial legal questions regarding financial privacy and data protection. Financial transactions can create highly sensitive information. Payment histories, account information, investment activity, customer identification details and transaction patterns can reveal significant information about an individual's personal and economic life. India has established a statutory data protection framework through the Digital Personal Data Protection Act, 2023 (DPDP Act). India Code identifies the Act as legislation governing the processing of digital personal data while recognizing both individual data-protection interests and lawful processing requirements. The commencement notification issued in November 2025 provides for phased commencement of different provisions. This paper examines the legal relationship between blockchain transparency and financial privacy. It analyses the principal conflicts between blockchain architecture and data protection principles and considers solutions including permissioned blockchains, off-chain storage, encryption, pseudonymization and zero-knowledge technologies.