Researchers use zero-knowledge to address privacy, AML concerns in stablecoins

Researchers from German crypto blockchain-based payments fintech etonec and different organizations person projected utilizing zero-knowledge proofs to guarantee regulatory compliance and privateness successful stablecoins. They person created a plan that allows fiat-based stablecoins to beryllium utilized similar cash, wrong limits.

The researchers’ plan allows a fig of limits, specified arsenic transaction limits, equilibrium limits, and turnover limits and enables Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance with the usage of zero-knowledge proofs, particularly zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). Below the preset limits, transactions would beryllium invisible to 3rd parties.

According to the researchers’ report:

“In essence, our extremity is to make a stablecoin that provides akin privateness guarantees arsenic the privateness coin Zcash oregon the mixer Tornado Cash, yet without the corresponding regulatory challenges with respect to wealth laundering and coercion financing.”

In this account-based model, users would make their respective ZKPs (presumably zero-knowledge protocols, though the abbreviation is not defined), past usage unsocial integer identities to nonstop impervious of funds to the blockchain, wherever validators would verify the ZKPs and adhd the transaction to the ledger. Identity could beryllium established by the authorities oregon a 3rd party.

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Balancing integer privateness and AML/CFT compliance is a taxable of existent debate successful the United States and European Union. The researchers accidental their strategy could perchance beryllium connected to Europe’s eIDASelectronic individuality system, erstwhile that strategy is finalized.

How tin #privacy for integer payments beryllium preserved, portion ensuring stableness and regulatory compliance? In this feasibility survey co-authored by @etonec_gmbh, @MinaFoundation, @Privatbank1796, and @SnT_uni_lu we amusement however it tin beryllium done.https://t.co/JYkuvURXWi pic.twitter.com/AH9n1DTSre

— Dr. Jonas Gross (@Jonas__Gross) December 15, 2022

In summation to etonec, participants successful the probe were the San Francisco-based Mina Foundation, relation of the Mina Protocol; German Hauck Aufhäuser Lampe slope and the Interdisciplinary Centre for Security, Reliability and Trust of the University of Luxembourg. Mina is noteworthy for its assertion to beryllium “the world’s lightest blockchain” and consuming extracurricular information without an oracle.