Anonymous credentials are credentials that allow people prove claims about themselves without having to show their personal information. For example, members of a marketing association can securely authenticate their credentials online and vote anonymously on items without revealing any of their identity details.
But anonymity allows bad actors to hide and authorities like law enforcement need to be able to identify them in certain situations. Traceable credentials are a way to allow the relevant authorities to “unwind” that layer of privacy and identify those bad actors through verifiable encryption.
Traceability is an opt-in feature for the credential holder. A verifier can request that the holder encrypts a specific attribute like an ID number so that the regular can access it only if needed. Only the regulator would be able to decrypt the attribute, not the verifier.