Author: Zen, PANews
Stablecoins are gradually spilling over from trading and DeFi scenarios into more real-world business processes such as payroll, B2B settlement, cross-border clearing, and corporate fund management. However, as on-chain dollars begin to carry real cash flows, the default transparency of blockchain also exposes another side: payment recipients, amount changes, balance fluctuations, and transaction relationships can all be observed over the long term and deconstructed into corporate operational information.
This means that the key issue for stablecoins in the next stage may no longer be simply "whether transfers can be faster," but rather "whether they can provide institutionally acceptable privacy protection while retaining verifiability." Against this backdrop, the competitive logic for on-chain privacy is also changing: from emphasizing anonymity to emphasizing a combination of default confidentiality, selective disclosure, and compliant connectivity.
This article attempts to answer three questions: First, why does privacy change from an added feature to a prerequisite as stablecoins become mainstream? Second, what kind of privacy approach is truly geared towards institutions? Third, taking Aleo as an example, how exactly is a programmable, auditable, and compliant privacy stablecoin infrastructure built?
Imagine this scenario: A cross-border e-commerce company decides to switch some supplier payments to stablecoins. Stablecoins act like an on-chain "USD payment interface," with faster arrival times, easier automation of reconciliation, and the ability to complete settlements even on weekends.
However, besides the convenience, another problem arises. On-chain transfers don't just verify whether the money has arrived; they also leave a more complete record of the transactions. Once this information is observed over a long period, it can potentially reveal a company's supplier network, procurement schedule, and even cash flow pressures.
For businesses, this is no longer a matter of privacy preferences, but rather a matter of trade secrets and operational security. The traditional financial system is not without transparency, but this transparency typically occurs within specific relationships such as those between banks, auditors, tax authorities, or regulators. The default state on the blockchain, however, directly exposes a large amount of transaction information to all observers.
In the past, this issue was not prominent. However, as stablecoins begin to spill over from trading and DeFi scenarios into more real-world business processes such as payroll, B2B settlements, cross-border clearing, and corporate fund management, this contradiction is being amplified. This means that, to some extent, when stablecoins begin to be used for payroll, supplier payments, cross-border settlements, and corporate fund management, privacy is no longer an add-on feature, but rather a prerequisite for the wider adoption of stablecoins.
As stablecoins become mainstream, new problems arise due to on-chain transparency.
The narrative of stablecoin growth is often expressed through massive transaction volume figures. According to Chainalysis, a blockchain data platform, stablecoin transaction volume is projected to reach $719 trillion by 2035 after "noise reduction" adjustments. The platform states that this growth, driven by organic adoption, signifies a structural shift in the way value flows across borders and in everyday business operations.
However, the reality is that, according to a report by McKinsey and Artemis Analytics, stablecoins will generate $35 trillion in transaction volume by 2025, but only 1% will be used for "real-world" payments. A significant portion of the total on-chain stablecoin transactions is spent on non-economic activities such as exchange aggregation, market-making cycles, and internal DeFi routing. If these noises are removed, the amount remaining for payments and real economic activities will significantly decrease.
However, this does not diminish the importance of stablecoins; instead, it shifts the discussion from grand narratives of transaction volume to more concrete issues. What stablecoins truly need to enter is not the abstract "on-chain transfer market," but rather real cash flows such as wages, B2B settlements, cross-border clearing, and corporate fund management.
Once these scenarios are entered, stablecoins carry not only the value of the US dollar but also sensitive information from business operations. Therefore, as the flow of funds carried by stablecoins increasingly resembles the real economy, transparency itself accumulates new costs, becoming a "transparency debt" after the mainstreaming of stablecoins. This "transparency debt" manifests in at least four types of costs:
Costs of business competition: A company's financial rhythm, supply chain relationships, procurement/sales strengths and weaknesses, and even cash flow pressures can all be leaked through on-chain activities, forming an intelligence profile that can be exploited by adversaries.
Compliance and Data Governance Costs: Mainstream regulatory systems require KYC/AML, sanctions screening, suspicious transaction reporting, and the transmission of "travel rules." However, the default exposure of behavioral data on-chain is not inherently equivalent to the information required for compliance. As a result, companies must both supplement off-chain compliance materials and manage the data leakage risks arising from excessive on-chain transparency.
Security and personal safety risks: The public disclosure of asset size and funding channels creates a potential attack surface. Whether targeting corporate vaults or extortion threats following the exposure of individual salaries and assets, this risk is more pronounced in on-chain payroll and fund management scenarios.
Product and Institutional Design Costs: The more stablecoins become financial infrastructure, the more crucial it is to establish clear boundaries between compliance controls, business privacy, and user rights. The key to the future is not simply increasing transparency or privacy, but designing authoritative, auditable, revocable, and tiered disclosure mechanisms.
Therefore, as stablecoins evolve from trading instruments to payment tools, the status of privacy needs to be redefined. Privacy is no longer a feature added to on-chain payments, but rather one of the fundamental conditions for stablecoins to enter real-world business processes.
Privacy Technology and Regulatory Game: From the Era of Cryptocurrency Mixing to Compliance Consensus
The earliest on-chain privacy tool familiar to the market was the mixer. Its basic logic is to put funds from multiple users into the same pool and then withdraw them through different addresses and paths, thereby severing the direct correspondence between the "input address and output address" and increasing the difficulty of on-chain tracking.
However, Mixer quickly ran into the hard line between regulation and sanctions. In 2022, the U.S. Treasury Department added Tornado Cash to its sanctions list, citing its use in laundering hacking and funds related to North Korea's Lazarus Group. In March 2025, the Treasury Department announced the removal of economic sanctions against Tornado Cash, but emphasized that it would continue to monitor the risks of North Korean hackers and malicious cyber actors using digital assets for money laundering.
At the same time, FinCEN, an agency under the Ministry of Finance, also proposed a draft rule in 2023, identifying "convertible virtual currency mixing" as a major category of money laundering concerns and requiring financial institutions to assume additional recording and reporting obligations for related transactions.
The lesson from this round of negotiation is that the financial system finds it difficult to accept strong anonymity as the ultimate goal, but it also cannot regard complete transparency as the ideal state. The truly scalable direction is more likely to be compliant privacy, which lies between the two: protecting transaction privacy by default, but allowing users or institutions to prove key information in the least necessary way in auditing, regulatory, risk control, or judicial scenarios.
This approach has already been explored in the Ethereum ecosystem and academic research. In their paper on Privacy Pools, Vitalik Buterin et al. proposed that users can use zero-knowledge proofs to demonstrate that their funds do not originate from known illicit sources, without disclosing their complete transaction history. It attempts to address how to provide a verifiable interface for compliance while protecting privacy.
The sanctions imposed on Mixer did not eliminate the need for privacy; instead, they drove some users to privacy protocols that emphasize compliance screening or "proof of uncontaminated funds." Therefore, on-chain privacy is transforming from a purely technical metric into a matter of policy and product design. Future competition may no longer focus on who can hide transactions most thoroughly, but rather on who can meet compliance requirements while minimizing disclosure.
The product logic of privacy stablecoins: building a moat with three layers of capabilities.
If we understand stablecoins as "on-chain settlement interfaces for the US dollar," then the privacy layer needs to address the issue of ensuring that sensitive information appears under appropriate conditions, to the appropriate recipients, and within the appropriate scope. A privacy-focused stablecoin product that better meets institutional needs typically requires three layers of capabilities:
The first layer is the default confidentiality of transactions and balances: it solves the first hurdle for enterprises to adopt on-chain payments, namely, wages, supplier payments, fund collection and account balances should not be automatically exposed because of the use of public blockchain;
The second layer is selective disclosure for auditing and regulation: Institutions and enterprises need privacy, but they cannot operate outside of auditing, taxation, regulation, and risk control. Therefore, privacy solutions are not simply about hiding information, but about minimizing its disclosure when necessary.
The third layer is the connection with the compliance toolchain: Once payment-based stablecoins become mainstream, compliance will not only be a matter for issuers, but will also extend to users, custodians, wallets, VASPs, and traditional financial institutions. For privacy-focused stablecoin products, whether a privacy approach is truly geared towards institutions depends on its ability to integrate with identity verification, sanctions screening, risk monitoring, auditing, and disclosure processes.
In other words, the key to determining whether a privacy approach is truly geared towards institutions is not whether it can achieve private transfers, but whether it can deliver default privacy, controlled disclosure, and compliance integration simultaneously.
Among existing privacy public blockchains, there are not many projects that can simultaneously address the issues at all three levels. Aleo's solution is the most representative of these, attempting to integrate these three capabilities into an end-to-end system.
At the first layer of "default confidentiality," Aleo's approach is not to add an extra layer of privacy features to the traditional account model, but rather to adopt a record model from the state storage and asset representation level. This means that balances and states can be represented as a series of encrypted records, rather than publicly accessible numbers. In payment scenarios, this addresses the first hurdle for enterprises adopting on-chain payments: transactions can be verified, but the payee, amount, and account balance are not automatically exposed.
At the second layer of "controlled disclosure," Aleo's focus is not on permanently hiding information, but on minimizing its disclosure within authorized boundaries. Its repeatedly emphasized view key mechanism is essentially a selective disclosure design: transaction details are not publicly available by default, but necessary information can be demonstrated to specific parties in auditing, tax, regulatory, or risk control scenarios. Last year, Aleo further strengthened this direction in its snarkOS v4.0.0 upgrade, enabling the payee to identify the sender's information under specific conditions, thus leaving room for counterparty identification and risk control in institutional scenarios.
At the third layer of "compliant connectivity," Aleo's approach goes beyond protocol-level design; it embeds itself into real-world payment processes through stablecoins, wallets, and partner networks. The successive launches of USDCx, USAD, and Shield demonstrate its attempt to extend privacy capabilities from the underlying architecture to asset issuance, wallet entry points, and payment toolchains. Furthermore, actions such as joining the Global Dollar Network and integrating with Request Finance indicate that this approach goes beyond serving native on-chain users; it aims to integrate with workflows more suited to institutional use, such as corporate finance, payroll processing, escrow auditing, and fiat currency deposits and withdrawals.
Moving such a path from concept to product requires not only technological sophistication and foresight, but also an understanding of cryptography, systems engineering, and financial infrastructure within the team, as well as a sufficiently long period of capital investment. From this perspective, besides the privacy narrative, another reason Aleo deserves attention is that its team background and fundraising pace provide the necessary conditions to continuously advance this approach.
Publicly available information shows that Aleo's early team had close ties to zero-knowledge proofs, cryptography research, and engineering system development. This is one of the reasons why it was able to advance its privacy approach to its underlying architecture, stablecoins, and wallet products relatively early on. In terms of capital, Aleo also received significant attention in its early network development stages, raising a total of $298 million from investors including a16z, SoftBank, Samsung, Coinbase Ventures, and Galaxy Digital.
Taking Aleo as an example: How can a programmable, compliant, and privacy-preserving stablecoin be implemented?
At the product level, Aleo has spent the past year building its asset base around stablecoins and then bringing private payments to users through its wallet, making its business strategy increasingly clear.
In December 2025, Aleo announced the launch of USDCx on the Aleo testnet via Circle xReserve, emphasizing that it is backed by USDC, can achieve cross-chain interoperability with USDC, and reduces reliance on third-party bridges. Earlier this year, USDCx added support for the Aleo mainnet and testnet, and Aleo also announced the availability of the USDCx mainnet on its official social media, along with related launch partners.
This reflects an important product logic. For institutions, privacy is not an isolated selling point. It must be built upon trusted issuance, reserve pegging, cross-chain interoperability, and compliance tools. In other words, institutions are more concerned with a usable, convertible, and auditable stablecoin infrastructure, and privacy is a key control layer within that infrastructure.
Compared to USDCx's connection to mainstream stablecoin systems, the collaboration between Aleo and Paxos Labs emphasizes the integration of "privacy, programmability, and institutional issuance framework." In October 2025, the two companies announced their collaboration to launch USAD, positioning it as a USD stablecoin issued on a privacy-enabled Layer 1 platform. In February 2026, USAD launched on the Aleo mainnet.
If USDCx and USAD address the issue of issuing and circulating private US dollars, then the crypto wallet Shield addresses the user entry point. In February 2026, Aleo released the "final piece of the puzzle" for its private stablecoin infrastructure—the default-private crypto wallet Shield. Its focus is not only on hiding transaction amounts but also on the default encryption of details such as the transacting parties and fees. Narratively, Shield's significance lies in pushing privacy from the underlying attributes of the blockchain to a product experience perceptible to the user.
Beyond specific products, Aleo is also pushing for broader stablecoin and enterprise payment collaborations. In 2025, Aleo joined the Global Dollar Network, initiated by Paxos. Officially described as a stablecoin alliance built around USDG distribution, its members include Robinhood, Worldpay, Standard Chartered, Kraken, and Anchorage Digital.
The significance of such collaborations lies in the fact that if privacy blockchains are to become financial infrastructure, they cannot solely serve native on-chain users, nor can they require companies to rebuild their entire processes around a single blockchain. Truly effective distribution channels often exist within payroll services, enterprise financial software, custodian institutions, auditing firms, and the deposit and withdrawal networks connecting the fiat currency world. The list of partners listed at Shield's launch reflects this line of thinking.
Auditable Privacy: Questions Stablecoins Must Answer Before Becoming Mainstream
Making privacy a part of stablecoin infrastructure addresses some of the issues surrounding blockchain transparency in real-world payment scenarios. However, if privacy features are to be widely adopted in mainstream finance, it cannot simply be limited to "hiding transactions"; it must also be auditable, governable, and trustworthy.
The first question to answer is whether this kind of privacy is truly usable. What businesses are really concerned about is whether the assets are universally applicable, whether exchanges are smooth, whether market depth is sufficient, whether accounting and tax systems can be integrated, and whether wallets and custody services are secure enough. If these infrastructures are not mature, then so-called privacy payments will easily remain at the stage of being technically feasible but difficult to use in actual business.
The second question is whether this privacy can be audited and regulated. If privacy cannot be translated into a verifiable and enforceable compliance capability, it will be difficult for it to become part of institutional-grade payment infrastructure. Furthermore, different jurisdictions have varying attitudes towards the regulation of privacy-focused stablecoins, and the relevant rules are still evolving. How the privacy layer should cooperate with KYC, anti-money laundering, and other regulatory requirements requires clearer industry standards from regulators.
Finally, there are the governance challenges inherent in selective disclosure itself. If view keys or similar mechanisms become the compliance gateway, a series of questions must be answered, including who can obtain disclosure authority, how the scope of disclosure should be limited, and who should determine the boundaries when the interests of regulators, businesses, and users conflict. Without a clear design for these issues, selective disclosure may fail to gain regulatory trust or reassure users.
From this perspective, Aleo represents a forward-looking approach, attempting to transform privacy from abstract cryptographic technology into product forms that are understandable to institutions and closer to real payment processes, such as stablecoins, wallets, and compliant disclosure interfaces.
Therefore, Aleo is not betting on a marginal demand, but rather on the ability of stablecoin infrastructure to be most likely to be repriced in the next phase. Whether it can achieve large-scale adoption in institutional payments still needs time and real-world business data to verify, but in terms of direction, it is already closer to real-world financial scenarios than many projects that are still stuck in "anonymity narratives".
Ultimately, this approach needs to prove itself through real-world on-chain activity, enterprise customer adoption, stablecoin liquidity, wallet usage frequency, and the effectiveness of compliance partnerships. The core issue for privacy stablecoins goes far beyond simply hiding transactions; it's about whether they can simultaneously be usable, auditable, governable, and trustworthy in real-world financial scenarios.
