Privacy blockchains are quietly retooling for a new audience: institutions that need to comply with anti-money laundering and know-your-customer rules. This week, two projects — Zcash and Canton — are highlighting features that let regulated entities use privacy tech without running afoul of the law.
Zcash's shielded pools
Zcash offers tailored solutions such as shielded pools. These allow users to transact privately while still giving authorized parties — like compliance officers — a view into the transaction history if needed. It's a middle ground between full transparency and full anonymity. The idea is to make privacy coins palatable for banks and exchanges that face strict reporting obligations.
Canton's sub-transaction privacy
Canton takes a different approach. Its network provides sub-transaction privacy, meaning individual pieces of a transaction can be kept confidential while the overall activity remains verifiable. That granular control could appeal to institutions that want to protect sensitive business logic or client data without breaking the chain's integrity.
The compliance challenge
Privacy coins have long been viewed with suspicion by regulators. The Financial Action Task Force has flagged anonymous transactions as a key risk. But the latest moves from Zcash and Canton suggest a pivot: instead of resisting compliance, they're building it in. For institutions, that could unlock use cases like private securities settlement or confidential supply chain tracking — areas where public blockchains have struggled to gain traction.
The moves come as institutional interest in crypto grows, but privacy remains a sticking point. Banks and asset managers have largely steered clear of privacy coins, fearing regulatory backlash. Zcash and Canton are betting that by offering compliance hooks, they can change that calculus.
Neither project is new. Zcash has been around since 2016, Canton since 2021. But the timing of these announcements — mid-2026 — lines up with a broader push by regulators to bring crypto into the traditional financial fold. The European Union's Markets in Crypto-Assets regulation, for instance, takes full effect later this year, and it demands that crypto service providers implement robust AML controls.
Whether these privacy features will satisfy regulators remains an open question. The FATF has been clear: anonymous transactions are a red flag. But by offering selective transparency, Zcash and Canton are trying to have it both ways — privacy for users, visibility for cops.
The next test will come when a major institution actually deploys one of these solutions at scale. So far, neither project has named a specific bank or exchange as a client. But the groundwork is being laid. For now, the privacy blockchain sector is watching to see if compliance-friendly features can finally open the door to institutional adoption.
