Public blockchains have long struggled to balance two competing priorities: financial privacy and regulatory oversight. While transparent ledgers provide accountability, they can also expose sensitive financial information that enterprises, stablecoin issuers, payment providers, and financial institutions would never disclose in traditional financial systems. At the same time, privacy-preserving technologies must still support compliance, investigations, and risk monitoring if they are to achieve mainstream adoption.
To address this challenge, Mysten Labs recently launched the public beta of Confidential transfers on Sui, a new framework designed to enable confidential onchain transactions while preserving appropriate visibility for authorized parties. As part of the initiative, Mysten Labs collaborated with ecosystem partners, including Merkle Science, to help ensure confidential assets could integrate with existing compliance, risk monitoring, and investigative workflows.
To discuss the vision behind Confidential transfers, the future of institutional blockchain adoption, and the importance of designing privacy infrastructure with compliance in mind from day one, we spoke with Abhinav Garg, Group Product Manager at Mysten Labs.
Many blockchain projects have focused on either transparency or privacy. Confidential transfers seem to take a different approach by combining confidentiality with controlled visibility. What was the guiding philosophy behind that design choice, and why do you believe it better reflects how modern financial systems actually operate?
Abhinav Garg: The guiding principle was to start from how financial systems operate in the real world rather than from how blockchains have historically operated. Most financial activity today is neither fully public nor completely opaque. Sensitive information such as balances, payment amounts, positions, and internal treasury movements is generally confidential, while authorized parties still have access to the information they need to meet compliance, operational, and regulatory requirements.
We believe that blockchain infrastructure needs to evolve toward that model if it is going to support larger-scale financial activity. Confidential transfers are designed to provide confidentiality for balances and transfer amounts while preserving the ability for issuers, analytics providers, exchanges, and regulators to perform their roles when appropriate. The goal is not anonymity, but to enable financial confidentiality without breaking the workflows that institutions depend on.
Much of the discussion around blockchain privacy focuses on protecting users, but enterprises, stablecoin issuers, and payment providers also have legitimate confidentiality needs. What kinds of real-world financial use cases do you think confidential transfers will unlock that have been difficult to support on public blockchains?
AG: Consumer privacy is very important, but many of the strongest drivers come from institutions and businesses. Public blockchains have created a new challenge for these organizations where the benefits of shared infrastructure often come with a level of financial transparency that would be unacceptable in most traditional financial systems.
For example, if a company pays suppliers using a public blockchain, it may unintentionally reveal its vendor relationships, payment terms, purchasing patterns, and overall business activity to competitors. Similarly, a payment provider settling stablecoin transactions may not want customer payment flows, merchant settlement volumes, or treasury movements visible to the entire market. These are not edge cases, but are common financial activities that organizations perform every day.
We think confidential transfers can help unlock these use cases and many others like treasury operations and cross-border payments, where transparency of participation is useful but transparency of every balance and transaction amount is not.
Mysten Labs has worked closely with ecosystem partners, including Merkle Science, as this initiative has evolved. Why was it important to bring compliance and blockchain intelligence providers into the conversation from the beginning, and what role do you see them playing as confidential financial infrastructure matures?
AG: A major lesson from previous privacy initiatives across the industry is that compliance and operational requirements cannot be treated as an afterthought. Some privacy technologies were initially designed to maximize confidentiality via anonymity, with questions around investigations, risk monitoring, exchange support, issuer controls, and regulatory expectations addressed much later, sometimes in a half-baked manner. As a result, the industry often found itself trying to retrofit compliance workflows onto systems that were not originally designed with those requirements in mind.
So from the beginning we wanted to understand how confidential transfers would fit into existing monitoring, investigation, and risk-management workflows. That meant working directly with analytics providers, stablecoin issuers, exchanges, and other ecosystem participants while the design was still evolving.
Analytics and blockchain intelligence providers play a critical role in helping institutions understand risk, investigate activity, and meet regulatory obligations. As confidential financial infrastructure matures, we expect their role to become even more important. The challenge is not eliminating visibility entirely, but creating appropriate visibility for the right parties under the right conditions. That is where we think analytics providers can help bridge the gap between confidentiality and operational oversight.
One of the most interesting aspects of this model is that it aims to preserve both privacy and legitimate oversight. How do you think confidential transfers can help financial institutions and regulators become more comfortable moving larger-scale financial activity onchain?
AG: One of the biggest barriers to bringing significant financial activity onchain is that many institutions are uncomfortable operating in an environment where sensitive financial information is visible to everyone by default. At the same time, regulators and compliance teams need confidence that oversight, investigations, and enforcement remain possible.
Our approach is to make confidentiality a feature of the financial system rather than an obstacle to it. Asset issuers remain the policy owners for their assets and can authorize appropriate access through analytics and compliance providers when monitoring, investigations, or regulatory processes require it. This is enabled through an asset-based auditor or view key model, and allows balances and transfer amounts to remain confidential by default while preserving the operational controls that financial institutions rely on.
We believe that balance is essential if blockchain infrastructure is going to support mainstream payments, stablecoins, and broader financial markets over the long term. Institutions should not have to choose between protecting sensitive financial activity and maintaining the visibility required for compliance and oversight.
How has collaborating with Merkle Science helped ensure confidential transfers reflect the practical needs of stablecoin issuers, payment providers, exchanges, and financial institutions?
AG: Collaborating with Merkle Science has been very valuable because they bring a practical understanding of how compliance and investigation workflows operate across the digital asset ecosystem. Beyond the technology itself, they have helped us think through how confidential assets would fit into real-world operational environments, like how risk scoring should work when transaction amounts are not publicly visible, how exchanges and payment providers can investigate suspicious activity, and how different participants can coordinate when additional visibility is legitimately required.
One of our goals throughout this process has been to build something that can realistically be adopted, rather than something that works only in theory. Input from partners like Merkle helps ensure that confidential transfers align not just with technical objectives, but also with the operational and compliance requirements that real-world adoption depends on. We highly value their partnership in this endeavor.
