Institutions and high-net-worth individuals have always had a demand for asset custody, but this field has long been stuck in a deadlock—on one side is the need for privacy, and on the other is compliance requirements; the two seem inherently opposed.

Traditional custody solutions either completely abandon regulatory oversight for privacy, risking regulatory red lines; or expose the custody relationship to pass compliance checks, contradicting the original purpose of custody. No one can truly balance both.

Where does this contradiction lie? Essentially, custody is about hiding the identity of the actual holder and their asset layout, but regulators’ responsibilities are precisely to penetrate and verify, preventing false custody and money laundering risks. One wants to hide, the other wants to verify—how can they coexist?

A certain online project has changed this approach. Instead of being stuck in the binary choice of "full exposure vs. complete anonymity," it’s better to create a refined solution—protect anonymity in identity, while maintaining compliance traceability in actions, with the two not interfering with each other.

Their solution is based on the Citadel protocol using zero-knowledge proofs, with the core idea of "identity obfuscation and compliance verifiability." The actual holder’s identity is hidden, so no one can see it on the books; but every custody operation leaves a trace, allowing regulators to verify through penetration. This way, privacy needs are protected while meeting regulatory bottom lines.

This system has already been operational in real-world business. It currently manages over €200 million in regulated custody assets, demonstrating that privacy protection and compliance requirements are not mutually exclusive. This new governance paradigm is rewriting the rules of the entire RWA custody industry.