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Currently, decentralized redactable blockchains have been widely applied in IoT systems for secure and controllable data management. Unfortunately, existing works ignore policy privacy (i.e., the content of users' redaction policies), causing severe privacy leakage threats to users since users' policies usually contain large amounts of private information (e.g., health conditions and geographical locations) and limiting the applications in IoT systems. To bridge this research gap, we propose PFRB, a policy-hidden fine-grained redactable blockchain in decentralized blockchain-based IoT systems. PFRB follows the decentralized settings and fine-grained chameleon hash-based redaction in existing redactable blockchains. In addition, PFRB hides users' policies during policy matching such that apart from successful policy matching, users' policy contents cannot be inferred and valid redactions cannot be executed. Some main technical challenges include determining how to hide policy contents and support policy matching. Inspired by Newton's interpolation formula-based secret sharing, PFRB converts policy contents into polynomial parameters and utilizes multi-authority attribute-based encryption to further hide these parameters. Theoretical analysis proves the correctness and security against the chosen-plaintext attack. Extensive experiments on the FISCO blockchain platform and IoT devices show that PFRB achieves competitive efficiency over current redactable blockchains. [ABSTRACT FROM AUTHOR]