One of the greatest advantages of public blockchains is also one of the biggest challenges for traditional finance: all transactions can be observed.
For ordinary users, this may simply be a matter of privacy.
But for banks, funds, and institutional traders, the issue is more direct—if all positions, transaction amounts, and counterparties are public, it is difficult for institutions to allocate large amounts of capital in a completely transparent environment.
Therefore, privacy technologies are emerging in new directions:
Instead of hiding transactions completely, only “what should be proven” is revealed.
ZK offers a different solution
Zero-knowledge proofs allow one party to prove that a certain condition is met without revealing the complete original data.
For example:
A user can prove they have completed KYC without having to reveal all their identity information to every counterparty.
An institution can prove a transaction meets quota requirements without disclosing its entire trading strategy.
The Ethereum Foundation is currently promoting privacy solutions for institutions, applying technologies such as ZK, FHE, and TEE for compliance verification, selective disclosure, and institutional on-chain transactions.
Traditional finance doesn’t need “complete anonymity”
What institutions truly need is usually:
The market cannot see all information, but regulators can verify it when necessary.
This is noticeably different from the early crypto privacy narrative.
In the past, privacy coins emphasized “others cannot see my transactions.”
Now, what institutions need is:
“Others cannot see information at will, but regulators and auditors can verify it when necessary.”
This is also why selective disclosure is becoming increasingly important.
Tokenized assets further amplify privacy needs
If, in the future, stocks, bonds, funds, and corporate cash all move on-chain, transaction transparency itself could become a commercial problem.
For example, if a fund buys large amounts of a particular asset and all addresses and transaction amounts are public, other market participants can observe their strategy in real time.
Polymath’s Confidential Assets, launched this year, is a privacy feature designed for this issue, allowing institutions to trade tokenized securities on public blockchains while hiding position, balance, and counterparty information, yet retaining compliance verification capabilities.
Therefore, privacy and compliance do not have to be completely at odds.
What is more likely to emerge in the future is:
Public settlement + private transactions + selective disclosure.
This is also a direction in the privacy sector that is worth long-term attention.
Truly mature privacy infrastructure may not make all information disappear, but instead ensure information is only verified when necessary.
