Some sites require the periodic deletion of .bash_history and .history files as a security policy, because they're quite likely to contain passwords and other secrets in them.
Naive non-programmers version: use a hash table to censor all substrings of a given length range that match against it ... sounds like it might be expensive (in compute time), also you have to keep a list of those hashes around.
Bet it's been wontfix-ed in at least one major shell?
HISTCONTROL
A colon-separated list of values controlling how commands are
saved on the history list. If the list of values includes
"ignorespace", lines which begin with a space character are not
saved in the history list.
[...]
Also look at HISTIGNORE for finer grained control.