Starknet launches privacy layer for ERC-20 tokens with compliance controls

Starknet is returning privacy to the center of blockchain development as new tools attempt to balance confidentiality with regulatory oversight.

On March 10, Starknet announced STRK20, a new privacy capability designed to give ERC‑20 tokens confidential balances and private transfers while keeping the option for regulatory disclosure when required.

The feature allows developers to deploy tokens on Starknet (STRK) with built-in privacy controls. Users can shield assets, hold balances privately, and transfer tokens without revealing transaction details on public block explorers.

At the same time, records can still be disclosed to auditors, regulators, or accountants if legally necessary.

Private balances and transfers for tokens

Blockchains such as Bitcoin and Ethereum operate with full transparency, meaning wallet balances and transactions can usually be viewed by anyone. While this design improves auditability, it can also limit institutional participation and certain financial use cases.

STRK20 attempts to address that issue. The system introduces what Starknet calls transaction-layer privacy, where asset ownership can remain hidden while the execution of transactions still occurs on a public network.

Once deployed, users can shield tokens into a private state, transfer them confidentially, or return them to a public state when needed. These functions remain tied to the same asset and liquidity pools, which avoids splitting tokens into separate public and private versions.

The first integrations are already planned within the Starknet ecosystem. Privacy-enabled swaps are expected to be available on Ekubo Protocol, while private staking options are also being explored for assets including Bitcoin and the Starknet token.

Privacy with compliance controls

The project also focuses on regulatory compatibility, an area that has historically limited privacy tools in crypto.

Instead of fully anonymous systems, STRK20 allows selective disclosure. Transaction details can be revealed to approved parties such as regulators or auditors when required. This approach attempts to give institutions privacy in daily activity while maintaining an audit trail for compliance purposes.

Starknet has already been experimenting with privacy-focused Bitcoin use cases. Earlier this year, the network introduced strkBTC, which allows optional shielding for Bitcoin balances while still enabling participation in decentralized finance applications.

Interest in privacy tools is growing in the crypto world. Every year, trillions of dollars move on public blockchains, but anyone can see transaction details and wallet balances.

Privacy tokens could let people pay, trade, and lend without exposing their financial activity. Starknet says this could make blockchain easier to use while still maintaining compliance.