Arc’s Opt-In Privacy: Selective Shielding with Built-In Auditability

TL;DR

• Arc, the EVM-compatible Layer-1 built by Circle for stablecoin finance, offers opt-in privacy that shields sensitive data while keeping transactions auditable. 
• Confidentiality is applied per workflow, so teams protect payroll, treasury, or trading without pushing an entire application private.
• Confidential transfers encrypt amounts while sender and receiver addresses stay visible, and view keys grant read-only access to auditors, regulators, and institutions, supporting the Travel Rule, AML, and KYC.
• Arc is currently in its testnet phase.
• Under the hood, Arc starts on Trusted Execution Environments (TEEs) and is designed to add three cryptographic backends as they mature: MPC (Multi-Party Computation), FHE (Fully Homomorphic Encryption), and zero-knowledge proofs.
• Institutions will be able to move sensitive workflows onchain without abandoning oversight, though legal review is required before relying on the roadmap for regulated activity.

What Is Opt-In Privacy on Arc?

Opt-in privacy on Arc means confidentiality is a choice applied per workflow. Teams decide which parts of an operation stay private and which remain public.

Opt-in privacy occupies a middle position between fully transparent chains and fully anonymous ones, which is a deliberate design choice for regulated finance.

On one side, transparent-by-default chains publish every transaction detail. On the other, fully private systems remove the disclosure that audit, risk, and compliance teams depend on. Arc targets the space between, shielding sensitive data while preserving governed access.

The Problem With “Transparent by Default” Blockchains

Most public blockchains expose transaction data and contract state to anyone watching the network. That openness supports auditability, but it breaks real financial workflows.

A company’s payroll should not double as public market data. Treasury movements should not broadcast counterparties, balances, or operational patterns to competitors.

Confidentiality From the Public, With Auditor Access Preserved

Arc’s stated goal is confidentiality from the public while preserving access for authorized parties. Regulated entities need privacy that their teams can still review.

Compliance, risk, finance, and audit teams need a clear model for who sees what and under whose authority. Arc frames this as “governed access.”

Arc’s documentation states that privacy features are on the roadmap but not yet available on Arc. 

Read more about Arc Network in our recent piece: What is Arc Network?

How Selective Shielding Works

Selective shielding on Arc applies confidentiality to specific data elements within a transaction. The model is granular by design. Teams keep the rest of an application’s logic and integrations intact, preserving the known EVM development environment.

Confidential Transfers: Shielding Amounts, Keeping Addresses Visible

The first roadmap phase introduces confidential transfers that encrypt amounts while keeping addresses public. 

1. Transaction amounts are encrypted and not visible on the public ledger.
2. Sender and receiver addresses stay visible for compatibility with analytics and monitoring tools.
3. Transactions still finalize onchain with the same deterministic finality as public transfers.

Confidential transfers let businesses protect sensitive commercial figures. Competitors cannot analyze payment sizes, yet regulators retain the ability to trace participants.

Arc Privacy: the Confidential Smart Contract Engine

Arc Privacy is a confidential smart contract engine announced on June 10, 2026. It is designed to bring opt-in private transactions and private smart contracts to Arc.

The engine processes transactions without exposing sensitive details to the public chain. It targets payroll, treasury, trading, and asset issuance while preserving governed access.

Opt-In by Workflow, Applied Where Teams Choose

Teams choose exactly where confidentiality belongs, so an application does not go fully private. A business can shield payroll while leaving other functions public.

This flexibility keeps the choice between transparency and confidentiality open per workflow. Developers keep building in a standard EVM environment.

Composable Privacy: Private Contracts Inside Larger Apps

Composable privacy means private contracts can interact as part of larger applications. Developers can reuse existing private contract logic to build multi-step private applications.

Builders can add confidentiality to production workflows while keeping their architecture. This preserves the modularity that makes onchain finance useful.

Built-In Auditability and Selective Disclosure

Auditability is designed into Arc’s privacy model from the start. The core mechanism is selective disclosure through cryptographic keys.

Authorized parties gain visibility when needed. The public sees only what the workflow chooses to expose.

View Keys: Granting Controlled Read Access

View keys are cryptographic keys that grant read-only access to specific confidential transaction details. They let a holder review shielded data without the ability to move funds.

According to Arc’s documentation, view keys support three groups:

• auditors and regulators reviewing details when required,
• institutions monitoring their own customers,
• developers building apps that balance privacy and transparency by design.

Who Can See What, When, and Under Whose Authority

The disclosure model on Arc is built around explicit authority. Confidentiality protects data from the public, while designated parties hold the keys to review it.

Defining authority upfront answers the first question compliance teams ask. It sets the boundaries of visibility before deployment.

Meeting the Travel Rule and AML Obligations

Selective disclosure is meant to satisfy obligations such as the Travel Rule, and AML. Institutions can protect sensitive business logic while producing records for regulators.

Because addresses stay visible in confidential transfers, existing blockchain analysis and monitoring tools remain compatible. This makes adopting privacy in a regulated setting easier.

Operational Visibility for Institutions Over Their Own Customers

Institutions on Arc retain the ability to monitor transactions involving their own customers. This supports internal risk review, fraud detection, and reporting duties.

A bank keeps sight of its own customer activity even when amounts are shielded from outsiders. The privacy applies to the public, while the institution’s own oversight continues.

The Cryptography Behind Arc Privacy

Arc’s privacy system is modular, so the underlying cryptography can change over time. It starts with one backend and is designed to add others.

The modular design lets the platform evolve as techniques mature. Arc treats each backend as replaceable.

TEEs as the First Backend

Arc starts with Trusted Execution Environments (TEEs) for performance and maturity. A TEE is a secure area within a processor that protects sensitive data even from the operating system.

A TEE produces attested results computed over shielded data. Circle selected TEEs first because they are production-ready today relative to newer methods.

A Pluggable Model: MPC, FHE, and Zero-Knowledge

The architecture is designed to support additional cryptographic backends as they mature. Three are named on the roadmap:

• Multi-Party Computation (MPC): splits secrets across multiple parties so no single entity can reconstruct sensitive data.
• Fully Homomorphic Encryption (FHE): lets computations run directly on encrypted data, preserving privacy during processing.
• Zero-knowledge proofs (ZK): let one party prove a statement is true without revealing the underlying data.

This pluggable model keeps Arc open to newer cryptography. As MPC, FHE, and ZK become production-ready, they can slot in.

How This Differs From Fully Private Chains and Mixers

Arc keeps addresses visible and disclosure possible, which separates it from fully private chains and mixers. Privacy tools like Zcash or Monero aim to obscure participants and amounts broadly.

Mixers break the link between sender and receiver entirely. Arc preserves traceability of participants and governed review of shielded data.

Real-World Use Cases Enabled by Arc Privacy

Arc’s privacy features target workflows that have been difficult to move onto public-by-default chains. Each keeps sensitive data private while retaining audit-ready access.

The examples below come from Arc’s own materials.

1. Payroll Without Exposing Compensation

Companies can run bulk payouts globally in near-real time without publicly revealing compensation amounts, recipients, or treasury outflows. Payroll data stays out of public view.

Audit-ready access remains available to authorized reviewers.

2. Treasury Operations and B2B Settlement

Treasury teams can move funds and manage balances without broadcasting counterparties or operational patterns to the market. Controlled disclosure supports approvals and audit.

B2B settlement runs while keeping counterparty relationships private.

3. Tokenized Asset Management

Issuers can create and manage tokenized assets while protecting holder activity, allocations, and sensitive positions. This keeps commercially sensitive distribution details off the public ledger.

Oversight remains possible through selective disclosure.

4. Trading, Perps, and Confidential Order Flow

Trading workflows can keep sensitive positions and intent confidential where needed. A trading workflow should not broadcast intent before execution.

Reducing transparency-driven targeting protects strategy while keeping a governance-friendly posture. This applies to perpetuals and order flow.

5. Borrowing and Lending Markets

Borrowers and lenders can participate in onchain credit markets without publicly exposing positions, collateral activity, or key lifecycle actions. The multi-step application logic these products require is preserved.

Confidentiality covers the sensitive parts while the workflow stays composable.

Arc’s Privacy Model vs. Other Approaches

Dimension	Arc (opt-in)	Ethereum (public-default)	Monero (full privacy)	Permissioned chains
Default visibility	Public, shield by choice	Fully public	Private by design	Restricted to participants
Amounts	Can be shielded	Public	Hidden	Visible to members
Addresses	Stay visible	Public	Obscured	Visible to members
Auditor access	Via view keys	Open to all	Limited or opt-in	Via permissions
Who joins	Open network	Open network	Open network	Approved parties only
Compliance fit	Built for Travel Rule, AML	Transparent, no shielding	Harder for regulated use	Closed by design

What This Means for Institutions Adopting Arc

For institutions, Arc’s model offers a path to move sensitive workflows onchain while keeping oversight duties. The opt-in design keeps adoption from being an all-or-nothing choice.

Teams can pilot confidentiality on one workflow, such as payroll, while keeping other functions public. The EVM compatibility lowers the engineering cost of experimenting.

One caveat stays central to any adoption plan. These privacy features are not yet live, and their scope and timing may change.

Institutions evaluating Arc should treat privacy as developing functionality. Any legal, tax, or compliance decision here requires review by qualified counsel, and legal review is required before relying on Arc’s privacy roadmap for regulated activity.

For teams that also need reliable network participation, Everstake operates as an established validator and staking provider. Everstake has supported 130+ networks to date and onboarded over 1.6 million retail and institutional delegators, maintaining operational rigor and being committed to staking infrastructure standards. 

As a professional non-custodial infrastructure operator, Everstake can support institutions seeking dependable validation and staking operations as ecosystems like Arc develop. Its track record across major chains makes it a practical partner for organizations building on emerging Layer-1 platforms.

Everstake holds SOC 2 Type II and ISO 27001:2022 certifications, with GDPR compliance and infrastructure assessed against the NIST CSF 2.0 framework at its highest maturity tier.

Everstake integrates with established custody workflows used by institutions, including Fireblocks, BitGo, and Anchorage Digital. For organizations building on emerging Layer-1 platforms like Arc, that combination of certified controls and custody integration makes validation and staking operations easier to bring in-house.

Frequently Asked Questions

Is Arc’s privacy available now?

No. As of July 2026, Arc is in its testnet phase.

Does opt-in privacy hide wallet addresses?

No. In the first phase, confidential transfers encrypt transaction amounts while sender and receiver addresses stay visible. This keeps compatibility with analytics and monitoring tools.

Can regulators see private Arc transactions?

Under the proposed design, yes, when authorized. View keys grant controlled read access so auditors and regulators can review transaction details when required, supporting obligations like the Travel Rule.

What is a view key on Arc?

A view key is a cryptographic key that grants read-only access to specific confidential transaction details. It allows review without the ability to move funds.

Is Arc Privacy zero-knowledge?

Not initially. Arc starts with Trusted Execution Environments (TEEs). The modular architecture is designed to add zero-knowledge proofs, along with MPC and FHE, as those backends mature.

Who is building and operating Arc?

Circle, the issuer of USDC, builds Arc as a stablecoin-focused Layer-1 blockchain. Arc uses USDC as its native gas token.