Post by Nethermind

Privacy alone isn’t enough for regulated financial markets. Fully anonymous systems leave no way to enforce the controls institutions and regulators require. Financial institutions need to know that only authorized participants can transact, sanctioned users can be prevented from moving funds, and auditors can verify activity when required, all without sacrificing confidentiality. With Stellar Private Payments (SPP), we bridge that gap. We built a shielded pool on Stellar with compliance embedded directly into the protocol. Using Association Sets, only KYC-verified users can transact, frozen participants cannot spend their notes without revealing which notes they own, and selective disclosure allows users to prove a transaction, proof of funds, or tax-relevant information without exposing the rest of their financial history. In this second article of our privacy series we show that privacy and compliance are not opposing goals. By embedding compliance into the protocol itself, public blockchains can deliver both the confidentiality institutions expect and the regulatory controls they require. We built this in collaboration with the Stellar Development Foundation, who commissioned the work and entrusted us with developing SPP. The implementation is live on Stellar Testnet, fully open source, and featured on the PSE Private Transfers Dashboard.

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