In February 2026, stablecoin payments surpassed traditional ACH bank transfers for the first time. This marked a real turning point for finance’s shift to on-chain rails. A trend set to further accelerate with the growing number of AI agents with access to funds. Key financial services players are taking notice. Mastercard is betting big on blockchain via its $1.8 billion acquisition of stablecoin infrastructure startup, BVNK.
What began primarily as a digital currency is now evolving into the rails of a new financial infrastructure. One capable of supporting payroll, supplier settlements and financial contracts. This is a shift long-awaited by blockchain advocates and institutional onlookers. As stablecoins move closer to mainstream financial operations, they expose a fundamental limitation: when financial activity occurs on-chain, all data is visible by default.
Much of the technical foundation needed to embed stablecoins into payroll systems exists already. These include custody, wallet infrastructure and integrations into payment workflows. Using stablecoins for payroll could shrink settlement times. Give employees faster access to earnings. Lower transaction and foreign exchange fees. Facilitate frictionless cross-border payments and enable transactions to be processed continuously rather than only during banking hours. These advantages are compelling, yet for many the lack of privacy is impossible to ignore.
The Privacy Problem
On public blockchains, every transaction reveals potentially sensitive details, including wallet addresses, transferred amounts and token types. Banks cannot send client flows where counterparties and external observers can view and analyse every activity. If salaries are paid directly on-chain, these details become visible. Not only to other employees, but also to rival organisations and automated trading systems. For staff and employers alike, this level of exposure is unacceptable. Salary bands, bonus cycles, team structures and supplier relationships all become observable.
This creates a dilemma for financial institutions. One option is to transact on public blockchains and accept the exposure of confidential information. The alternative route is to build private or permissioned networks that restrict visibility. These sacrifice interoperability with the broader ecosystem of wallets and exchanges.
Neither way works for financial institutions, payroll, B2B transactions or contractual payments, where confidentiality, regulatory compliance and auditability must coexist. The risks of getting this wrong are significant. A single privacy lapse can trigger regulatory enforcement, lawsuits and reputational damage. Even without an explicit breach, visible transaction flows can reveal internal cost structures and commercial strategies. In competitive markets, this information can disrupt supplier relationships and damage trust.
The core challenge is therefore not whether transactions should be verifiable, but how they can be provable and compliant without exposing the underlying data.
The Limitations of Closed Networks
A common response from many banks and industry consortia has been to experiment with private or enterprise blockchain networks. These systems promised greater confidentiality, but they often weakened properties such as interoperability, neutral settlement and multi-party assurance – the very features that made blockchains attractive to these institutions in the first place.
In practice, heavy permissioning led to closed ecosystems with limited external connectivity and governance structures that were challenging to maintain. In many cases, these networks became little more than siloed databases with cryptographic branding. They struggled to connect with external networks, lacked meaningful decentralisation and failed to attract independent participants.
Financial services firms frequently struggle to create their own blockchains. Difficulties often stem from attempts to build private networks that mirror existing infrastructure, rather than embracing open systems. A 2023 study of enterprise blockchain projects found that many failed due to misaligned business requirements, weak governance models, or technical mismatches.
The deeper structural problem is that financial institutions want the scale and openness of shared infrastructure but cannot risk exposing customer data, business logic, counterparties or internal controls. They want to use shared digital rails, but still find themselves centralising sensitive parts of the workflow, such as identity checks, routing logic and fraud controls, within a single internal system or provider. This concentrates risk, increases operational burden and complicates compliance.
A Third Path
The choice between shared infrastructure and private networks is a false binary. Cryptography can be used to build private execution layers that keep sensitive fields encrypted while still allowing the network to validate transactions that follow the rules – solving the privacy and verifiability trade-off. Innovations such as the Private Shared State (PSS) enable multiple parties to collaborate on shared data while keeping sensitive details hidden, even on public blockchains.
This approach relies on the combination of two well-established cryptographic techniques: zero-knowledge proofs (ZKPs) and multi-party computation (MPC). ZKPs allow a party to prove a claim, for example that a transaction complies with specific rules, without revealing the underlying data. MPC enables several participants to jointly compute over encrypted inputs so that no single participant ever has full visibility of the entire data set.
In a payroll context, each salary amount can remain encrypted on-chain. That way employers and payment processors can still prove that total payroll balances add up, taxes and deductions are applied correctly, and funds are distributed only to authorised wallets. Furthermore, regulators and auditors can independently verify transaction validity using cryptographic proofs, without accessing raw salary figures or employee details.
This model is not purely theoretical. Cryptographic infrastructure built on these principles has already been deployed at scale in identity applications. World ID, which supports proof of human verification for nearly 18 million people across 160 countries, relies on this approach to validate identity without exposing personal data. The same foundations can be used directly in financial infrastructure.
Beyond Blockchain
The implications for this technology extend far beyond stablecoin transfers. Banks and fintechs increasingly need to collaborate on risk and compliance without sharing raw customer data. Here, encrypted, verifiable computations can support credit scoring, portfolio risk analysis and anti-money laundering checks – all while preserving privacy.
MPC-based Know Your Customer (KYC) processes further illustrate the value of selective disclosure. Instead of repeatedly submitting full identity documents, users can prove specific attributes, such as age, residency or accreditation status, while keeping the underlying data encrypted. This significantly reduces breach risk, improves user experience and lowers compliance costs associated with data storage and duplication.
Built-in Privacy
Crucially, this approach does not require abandoning public blockchains and other shared infrastructure, as privacy is woven into the application layer. Token transfers can include encrypted fields for amounts, senders, recipients and metadata. Meanwhile, smart contracts can verify zero-knowledge proofs to enforce compliance rules such as sanctions screening, transaction limits and provenance checks.
MPC systems allow for narrowly scoped access for auditors and regulators only when legally required. So, for end users, the experience remains unchanged: wallets sign transactions as usual, gas costs remain predictable, and most computation occurs off-chain with proofs efficiently batched. This enables institutions to retain confidentiality without forfeiting the benefits of public networks, while regulators gain provable oversight without exposing sensitive financial data.
When executed properly, this model preserves the core strengths of stablecoins, including rapid settlement, global reach and programmability. They go further though, adding privacy and verifiable compliance through cryptographic assurance rather than full transparency.
The Future of the Private Shared State
Zero-knowledge proofs and multi-party computation have matured from academic research into ready-to-use systems. At the same time, regulators are increasingly open to cryptographic evidence as part of compliance and audit frameworks. As digital asset infrastructure scales, verifiable privacy is no longer optional; it is essential.
For decades, we have faced a binary choice: make sensitive data private inside one organisation, or make it fully visible in shared systems. Private execution layers are now making the trade-offs from that choice obsolete. Computation can run across independent operators while the data itself stays encrypted, which changes how the next generation of digital financial infrastructure can be built.
Issuers, custodians and infrastructure providers should adopt privacy layers that support Private Shared State patterns. Regulators should define how cryptographic proofs satisfy oversight requirements, while financial institutions and FinTechs should begin piloting these models in real-world payroll and payment flows. Successfully implementing these systems will propel stablecoins into institutional-grade payment rails, defining the next era of digital money: interoperable, compliant and privacy-preserving at scale.
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