Blockchain technology—a decentralized digital ledger system that records transactions across multiple nodes—has the potential to transform industries such as finance, supply chain management, and healthcare. Each block in the chain contains a list of transactions, a timestamp, and a cryptographic hash of the previous block, forming a secure and verifiable chain of records.

While the security, transparency, and immutability of blockchain systems offer clear operational advantages, such as fraud reduction and improved efficiency, these same features raise complex compliance challenges under Canadian privacy legislation.

The collection, use, and disclosure of personal information are governed by the Personal Information Protection and Electronic Documents Act (PIPEDA), as well as substantially similar provincial laws in Alberta, British Columbia, and Québec. Québec has recently amended its privacy legislation through the Act to Modernize Legislative Provisions as Regards the Protection of Personal Information (Law 25), which introduced additional obligations for organizations processing personal information in that jurisdiction.

Understanding how blockchain aligns—or clashes—with Canadian privacy law is essential for building compliant, future-ready systems.

Challenges and opportunities of blockchain technology

Blockchain’s decentralized structure and immutable architecture offers significant advantages:

  • Security: Reduces the risk of data tampering
  • Transparency: Enables auditable and traceable transactions
  • Data integrity: Prevents unauthorized modifications to stored records

In financial services, blockchain is already transforming payment rails, enabling decentralized finance (DeFi) and tokenized assets, and powering identity verification systems. In healthcare, blockchain is being explored to manage patient consent and securely share medical records across providers. However, these same features pose challenges for compliance with Canadian privacy laws:

  • Immutability: The inability to alter or delete data conflicts with principles of data minimization and the right to rectification.
  • Decentralization: Blockchain’s decentralized nature can complicate the identification of the organization accountable for the collection, use, and disclosure of personal information—a key requirement under Canadian privacy laws.

Entities using blockchain should consider clarification of their roles as an accountable entity or service provider, especially in permissionless public blockchains, and evaluate whether to document these responsibilities by contract or within their governance frameworks.

The path forward? Clarifying who’s responsible, obtaining valid consent, minimizing what’s stored, and designing with privacy from the outset.

Accountability

Entities leveraging blockchain should clearly define their roles as either accountable organizations or service providers under Canadian privacy laws.

This is particularly important in permissionless public blockchains, where decentralization can obscure responsibility for personal information. This determination affects which entity is responsible for obligations such as obtaining meaningful consent, responding to access requests, and implementing adequate security measures.

To reduce ambiguity and support compliance, these roles should be clearly articulated and documented—either through contractual agreements, terms of use, or embedded within the governance frameworks of the blockchain system. In consortium or enterprise blockchains, this may involve negotiated accountability arrangements among participants. For public blockchains, it may require creative solutions such as smart contracts that encode responsibilities or external governance models that support coordinated privacy oversight.

Consent requirements

Canadian privacy laws require meaningful consent for the collection, use, and disclosure of personal information. In the context of blockchain, this means individuals must expressly agree before their data is recorded on-chain.

In financial services, for instance, organizations leveraging blockchain for Know Your Customer (KYC) processes must incorporate appropriate consent mechanisms. Similarly, in healthcare, blockchain used for managing patient consent or medical records must allow individuals to provide express, informed consent before their data is entered into the system.

Innovative solutions such as smart contracts can automate management of consent and allow users to withdraw consent for off-chain data uses, supporting privacy compliance.

Data minimization

Data minimization—collecting and processing only what personal information is necessary—is a core principle under Canadian privacy laws. Blockchain’s design, which often involves storing comprehensive datasets, can conflict with this obligation.

For example, blockchain-based payment systems that permanently record transaction metadata may inadvertently create personal information trails. Organizations should consider avoiding storing personal information on-chain where possible. Even hashed or encrypted data on a blockchain may qualify as personal information under Canadian privacy law. Techniques such as off-chain storage, commitments, keyed hashes, or zero-knowledge proofs (ZKPs) can reduce the risks associated with on-chain personal information while supporting privacy compliance efforts.

Where bringing personal information on-chain cannot be avoided, organizations should consider de-identification or pseudonymization techniques, while keeping in mind that under Canadian privacy law, such data generally continues to be regulated if it can be re-identified as an individual.

Respecting individual rights

Canadian privacy laws grant individuals rights over their personal information, including the right to access their data and request corrections (rectification). Law 25 also provides individuals the right to request the cessation of dissemination or de-indexing of their personal information in specific circumstances.

Because blockchain records can be permanent, organizations designing these systems must respect these rights while maintaining blockchain’s integrity.

One common solution is to store personal information off-chain, using the blockchain only to reference this data, which can then be updated or deleted in response to requests. Another approach is to use de-identification techniques, ensuring that data written to the blockchain cannot be directly linked back to an individual.

In cases where corrections are needed, new blockchain entries can be added to supersede the old information without erasing it, allowing both transparency and compliance. By building these mechanisms into their blockchain architecture, organizations can better align with privacy laws while still leveraging blockchain’s benefits.

Privacy by design and security

Blockchain projects in Canada should consider embedding privacy features from the outset—such as using encryption, pseudonymization, and privacy-preserving technologies like ZKPs. Under Canadian privacy laws, Privacy Impact Assessments (PIAs) are best practice and under Law 25, PIAs are mandatory at the outset of any project to acquire, develop, or update information systems or services involving personal information. 

PIAs should take into account privacy by design, governance models and assess security risks specific to blockchain, including secure key management and vulnerability management. Adopting privacy by design and robust security practices not only aids compliance but builds trust with clients, showing a proactive commitment to protecting personal information.

Conclusion

Blockchain technology offers tremendous promise for innovation and efficiency across Canada’s key sectors, but its adoption must be balanced with a strong commitment to privacy compliance.

As privacy laws continue to evolve, organizations must stay ahead by integrating privacy by design, minimizing on-chain personal data, and respecting individuals’ rights at every stage. By embracing comprehensive governance frameworks and leveraging privacy-enhancing technologies, Canadian organizations can confidently harness the benefits of blockchain while safeguarding personal information.

If you have any questions about how your blockchain strategy complies with Canadian privacy law, please contact the authors or a member of our Privacy & Cyber Security or Blockchain & Digital Assets groups.