Bitcoin's anonymity features significantly impact regulatory policies. Its pseudonymous nature, where transactions are linked to wallet addresses rather than real identities, complicates efforts to track illicit activities like money laundering or tax evasion. This challenges regulators to balance innovation with oversight. Governments often respond with stricter Know Your Customer (KYC) and Anti-Money Laundering (AML) rules, requiring exchanges to verify user identities. However, decentralized platforms and privacy-focused tools, such as mixers, undermine these measures, pushing regulators toward broader surveillance or outright bans. Conversely, some argue Bitcoin’s transparency—via its public blockchain—offers tracing potential, though this requires advanced tools and cooperation. The tension between privacy and control continues to shape global policies, with jurisdictions like the EU and US tightening crypto regulations while others embrace its libertarian appeal.