Definition ∞ Digital assets designed to obscure transaction details, such as sender, receiver, and amount, thereby enhancing user privacy. These tokens employ advanced cryptographic techniques, like zero-knowledge proofs or ring signatures, to shield transaction metadata from public ledger inspection. Their primary function is to provide a higher degree of anonymity for participants in blockchain networks.
Context ∞ ‘Privacy Tokens’ are a recurring subject in regulatory debates and news cycles concerning financial transparency and illicit activity. Discussions often revolve around their potential for misuse, the challenges they pose to anti-money laundering (AML) and know-your-customer (KYC) regulations, and the technological advancements enabling their privacy features. Their presence raises questions about the balance between user privacy and regulatory compliance in the digital asset space.
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