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New research by the Bank of England suggests that emerging privacy technologies such as zero-knowledge proofs could enhance user control over data held in the digital pound.
the Bank of England It has been suggested that zero-knowledge proofs and other privacy-enhancing technologies – also known as PTEs – could be viable components of a potential digital pound.
In its latest form a report Under the title “Enhancing the privacy of the digital pound,” the central bank said that technologies such as pseudonymization, ZK proofs, and secure multiparty computing “may be practically applied to digital currency systems such as the digital pound to reduce data sharing.” Whether with the central bank or between payment intermediaries, giving users greater control over their data and enhancing user privacy.
“This presents opportunities for the digital pound to be at least as private as current forms of digital money and perhaps even more private, although as with any technology, there are limitations to what emerging types of PETs can achieve.”
Bank of England
Following public feedback from its 2023 consultation, the Bank of England and HM Treasury have reaffirmed their commitment to protecting user privacy, reassuring that neither the government nor the central bank will have access to users’ personal data.
ZK-proof is a cryptographic protocol that enables one party to prove that they know something without revealing the actual information. The technology is actively used in blockchains such as Ethereum (Ethereum), Zcash (Like you) and polygon (pee) for privacy and scalability solutions.
In collaboration with MIT’s Digital Currency Initiative, the UK central bank has explored the potential of emerging cryptocurrencies, but still acknowledges the limitations and trade-offs they impose, especially in balancing privacy and regulatory compliance.
“Tensions may also arise between regulations requiring data disclosure and the freedom to publish pets,” the report stated, underscoring the need for more research to address these challenges.
The Bank of England began exploring a digital pound in 2020, when it set up a taskforce to evaluate the design and potential implications of a central bank digital currency. However, public consultations and detailed assessments have been ongoing since early 2021, with the central bank stressing the importance of adapting to technological advances in payments and the decline in the use of cash. The bank has not yet made a final decision about launching its digital currency.
