Payy’s New Layer-2 Puts Transaction Privacy Back at the Center of Ethereum’s Future
Payy launches a privacy-first Ethereum layer-2 enabling private ERC-20 transfers as institutions push for confidential onchain finance.
As pressure mounts on financial institutions to move capital onchain without surrendering sensitive data, crypto startup Payy is betting that privacy, not transparency, will define Ethereum’s next phase. The company has launched the Payy Network, a new Ethereum layer-2 designed to enable private ERC-20 token transfers by default, targeting both traditional finance firms and crypto-native users who want discretion without complexity.
Announced this week, the network can be added directly to MetaMask and other EVM-compatible wallets, lowering the barrier to adoption. Unlike many privacy tools that rely on specialized contracts or additional applications, Payy’s approach routes ERC-20 transfers through built-in privacy pools automatically. Users can send tokens from standard wallets while masking transaction counterparties on the public ledger, an experience Payy positions as frictionless and familiar.
The design reflects feedback Payy says it has received from banks and fintech companies exploring onchain settlement but wary of full public traceability. In its current form, Ethereum exposes transaction flows in a way that can reveal counterparties, balances, and business relationships. Payy CEO Sid Gandhi has argued that this level of transparency is incompatible with real-world financial operations, particularly for institutions bound by confidentiality and compliance obligations.
Under the hood, the network allows funds to move privately until they interact with decentralized applications or smart contracts. At that point, assets are withdrawn from privacy pools to newly generated addresses, limiting onchain linkability while preserving composability with the broader Ethereum ecosystem. The layer-2 supports all ERC-20 tokens, but Payy has made clear that stablecoins are its primary focus, reflecting their growing role in payments, treasury management, and cross-border settlement.
The company says it has already signed undisclosed launch partners among stablecoin issuers, with formal announcements expected in the coming weeks. If confirmed, those partnerships would place Payy squarely at the intersection of crypto infrastructure and mainstream finance, an increasingly crowded but strategically important space.
Payy is not entering the market alone. Ethereum-based privacy solutions such as Aztec Network and Railgun already offer mechanisms to obscure transaction data, while privacy-centric cryptocurrencies like Zcash and Monero saw renewed demand during a broader privacy resurgence in 2025. At the protocol level, Ethereum developers have also been debating native privacy enhancements, including wallet-level features discussed under the Kohaku roadmap, which aims to reduce dependence on centralized transaction trackers.
What differentiates Payy is its emphasis on default behavior rather than optional tooling. By making privacy the standard path for ERC-20 transfers, the project is challenging the assumption that users must choose between usability and confidentiality. That philosophy builds on Payy’s earlier products, including a privacy-focused wallet and a crypto banking card launched in mid-2025, which the company says have attracted roughly 100,000 users.
Whether Payy can scale its layer-2 amid regulatory scrutiny of privacy technologies remains an open question. But the launch underscores a broader shift in crypto’s narrative. After years of radical transparency, the industry is grappling with a more nuanced reality: if blockchain is to support real economic activity, privacy may be a prerequisite rather than a luxury.
