Crypto glossary
Privacy pools (compliant privacy)
Privacy pools are mixers where users withdraw privately while proving, with zero-knowledge proofs, that their funds are not from known illicit deposits.
A classic mixer pools deposits so withdrawals cannot be linked to them, but that also shields stolen and sanctioned funds, which led to sanctions and prosecutions. Privacy pools, described in a 2023 research paper co-authored by Ethereum co-founder Vitalik Buterin, keep the privacy but add a filter. When withdrawing, a user proves with a zero-knowledge proof that their deposit belongs to an association set, a list of deposits considered legitimate, without revealing which one.
Association sets can be maintained by different providers using their own criteria, so a user can show that their funds are separate from, for example, deposits linked to a hack. Deposits later found to be illicit can be excluded from the set, and implementations let users who are excluded withdraw publicly to their original address. A first implementation went live on Ethereum mainnet in 2025.
The model tries to reconcile financial privacy with AML expectations, but regulators have not formally endorsed it, and its protection depends on the quality of the association sets and on enough users joining to make the pool private.
Example
A user deposits 1 ETH into a privacy pool and later withdraws to a fresh address, attaching a proof that the deposit is in an approved set that excludes funds from known exploits. An exchange receiving the ETH accepts it.