There seems to be an invisible, intangible wall between traditional finance and DeFi. On one side are strict compliance requirements, and on the other is a free but unpredictable decentralized world. Large institutions are actually eager for DeFi's yields, but if they really want to jump in, they have to face that razor-thin "compliance tightrope."

Recently, I had a chat with a few friends in the asset management circle, and I found that this situation is gradually changing. When they mentioned privacy computing projects, their attitude was noticeably different.

What is the fundamental reason? To put it simply, for large asset management firms, DeFi has never been just about interest rates. Anonymous transactions are a taboo; being unable to trace fund flows is a nightmare. Last year, a German asset management company experimented with lending protocols on a certain public chain, but the project was halted because they couldn't prove the destination of each transaction to auditors. The money lost was minor; what really hurt was the trust that was eroded.

This is why the concept of verifiable privacy is so attractive. For example, using a verifiable privacy framework, transaction details are indeed encrypted, but regulators holding special keys can open a "compliance view." In other words, it's like giving institutions a set of invisibility cloaks, while auditors have a pair of x-ray glasses. It sounds strange, but it precisely aligns with the implementation needs of new regulations like the EU's MiCA.

Data speaks: In Q3 last year, compliance-oriented DeFi protocols managed assets that doubled in size, with projects that combine privacy protection and auditing features attracting funds at the fastest rate.

Here's a real case. A private fund in the Netherlands is currently testing bond tokenization on a privacy computing platform—investor identities are hidden, but every transfer and interest distribution automatically generates compliance reports sent directly to the custodian bank. The fund partner said this solved a long-standing headache for them. The previous processes were terrifyingly complex, but now they finally have a way to balance privacy and compliance.