Polygon Labs on Monday introduced a shielded transfer feature for USDC and USDT in its consumer wallet, allowing users to send the two stablecoins without revealing who sent them. The move brings a layer of privacy to token transactions that are normally visible to anyone on the public blockchain.
The feature was built with Hinkal, a privacy protocol that focuses on confidential transactions. Polygon’s wallet now lets holders of USDC and USDT move funds on the Polygon network while keeping sender addresses hidden. The recipient still sees the amount, but the transaction appears in a privacy pool rather than the public ledger.
How the shielded transfer works
When a user opts for a shielded transfer, the wallet generates a zero-knowledge proof that the sender has sufficient funds. The proof is submitted to a smart contract that verifies the transaction without exposing the sender’s address or balance. The recipient receives the stablecoins as a fresh, unlinked token from the privacy pool.
Polygon Labs said the feature is available immediately in the Polygon Wallet, which the company launched last year as a self-custody option for its ecosystem. Users can toggle between public and shielded transfers for each transaction.
Why privacy matters for stablecoins
Stablecoin transfers on public blockchains leave a permanent trail of sender and receiver addresses, amounts, and timestamps. For businesses and individuals who want to pay suppliers or receive payments without broadcasting their financial activity, that transparency can be a liability. Shielded transfers break the link between the sender and the transaction, though the total supply and the smart contract remain auditable.
The move comes as regulators globally tighten rules around crypto privacy. Polygon Labs and Hinkal have designed the feature to comply with anti-money laundering standards by not obscuring the recipient address, meaning law enforcement can still trace funds if needed.
Partnership with Hinkal
Hinkal is a privacy layer that integrates with existing wallets and decentralized applications. The protocol uses a non-custodial model, meaning Polygon never controls user funds. Hinkal’s technology has been used in other DeFi privacy tools, but this is its first direct integration with a major wallet provider’s native stablecoin transfers.
Polygon Labs said the feature will be extended to other tokens and chains over time, but gave no timeline for the rollout.
The shielded transfer option is live now for all Polygon Wallet users holding USDC or USDT.
