Privacy Transfers Opened With a Passkey and Screened by Chainalysis at the Door: zERC20 v2 and the Practical Shape of Privacy Design After the Mixer Crackdown

What happened: nine months after v1, a full redesign for usability

zERC20 launched v1 on mainnet in February 2026 and released v2 as its replacement on November 4. Wrapping and private transfers on v1 stopped at 00:00 UTC on November 4 (9:00 JST), while withdrawals from v1 remain possible until April 30, 2027. The core v2 feature is the one-time address: users send tokens from a wallet or an exchange to a disposable zERC20 address to fund a private balance, and withdraw all or part to any address in the original token. A relayer submits transactions on the user's behalf and takes a small fee from the token being sent, so a user holding only USDC can transfer and withdraw without ETH. Accounts are created in the browser and unlocked with passkeys stored in PRF-capable managers such as iCloud Keychain, Google Password Manager or 1Password, with an optional 24-word recovery phrase as backup. v2 also offers receive codes via QR or link, a merchant checkout page that lets online shops receive ETH or USDC into a private balance while keeping sales confidential on-chain, and view keys that grant read-only access to balances and history for a trusted party such as an accountant. Supported assets at launch are zETH and zUSDC on Ethereum, Base and Arbitrum One, zBNB on BNB Smart Chain, and zPOL, zUSDC and zJPYC on Polygon.

How it works: only the entrances and exits are visible

zERC20 wraps tokens such as USDC one-to-one into a "z" version held and spent as a private balance. While funds sit in the private balance, holdings are not visible on-chain, and payments to other zERC20 accounts do not reveal who paid whom or how much. Only deposits and withdrawals are recorded publicly; the release likens it to entering and leaving a building, with everything inside remaining private. Payment validity is proven with zero-knowledge proofs. The company says it has formally modeled everything from the smart contracts to all ZK circuits using Groth16 and Nova in Lean4, proving that no one but the rightful owner can spend funds, that double spending is impossible, and that the pool always holds enough tokens to back all balances. A trusted execution environment independently verifies proof validity without exposing the secret witness, and only proofs passing this check are accepted, adding a safeguard against circuit bugs.

Regulatory design: compliance built into the protocol

What makes the launch notable is its layered set of guardrails. Every deposit sender and withdrawal recipient is screened by Chainalysis; a flagged deposit cannot enter the private balance and can only be returned to its sender. Addresses on a blocklist, including sanctioned addresses, cannot send, receive, wrap or unwrap z-tokens, and all list changes are public. An attester server running in AWS Nitro Enclaves independently checks and signs every private transfer, withdrawal and merge, and the chain accepts a transaction only with both a valid zero-knowledge proof and the attester's signature. Only under a legal request can a designated auditor, after an approval procedure, view a target account's private history, and that use of a view key is recorded in a public log. Protocol administration is by multisig including independent external signers, with upgrades taking effect only one day after being publicly scheduled on-chain. At the same time the system is non-custodial: relayers and screening cannot move user funds, and an Exit function returns deposits to the sender even if the service cannot process them.

Context: a Japan-rooted team and an "unofficial wrap" of JPYC

zERC20 Limited is a Cayman Islands company founded in May 2026. Its CEO, Mai Fujimoto, is a well-known figure in Japan's blockchain industry, and the Japanese-language release on PR TIMES signals a focus on the Japanese market. Notably, while offering a z-version of JPYC on Polygon, the release states that zJPYC and zUSDC are unofficial wrapped tokens provided independently by zERC20, and that neither JPYC Inc. nor Circle is involved in their provision, co-development, review or endorsement. How a third-party wrap of a stablecoin issued without the issuer's consent is treated under Japan's electronic payment instrument regime remains unsettled, and the issuers' response will be a point to watch.

[Business Development Insights]

1. Privacy products become marketable when the design centers on who may see rather than who may not. zERC20 v2 conceals from the public while naming four viewing parties: Chainalysis, the attester, an auditor under legal request, and an accountant chosen by the user. When financial institutions and operating companies evaluate privacy technology, the axis should be how concretely viewing rights are specified, not how strong the concealment is.
2. No gas, passkeys and direct deposits from exchanges form a minimum configuration for onboarding users unfamiliar with crypto that other products can reuse. What v2 solved is not cryptography but the barriers of topping up ETH, managing seed phrases and moving to new chains. Whether Japanese operators meet these three conditions will determine how far stablecoin payments and transfers spread to general users.
3. Unofficial wraps circulating without issuer consent are a new risk-management issue for stablecoin issuers. zJPYC is offered without JPYC Inc.'s involvement, and the issuer cannot observe transfers inside private balances. Issuers and intermediaries should define in advance their policy on wrapping and bridging of their tokens, whether tolerance, partnership or technical restriction.

[Sources]

PR TIMES (zERC20 Limited), "Private transfers are no longer hard: zERC20 v2 launches on mainnet" (November 4, 2026) https://prtimes.jp/main/html/rd/p/000000001.000194061.html New Economy, "[Nov 4 topics] zERC20 v2 launches on mainnet, passkey support simplifies private transfers" (November 4, 2026) https://www.neweconomy.jp/posts/623770 zERC20 official site https://zerc20.io/ zERC20 Docs https://docs.zerc20.io/ zERC20 Wallet https://wallet.zerc20.io/