This week, the identity and payment firm, Nuggets, announced it had partnered with the Bank of England (BoE) to develop a privacy and identity layer for the country’s future central bank digital currency (CBDC). The zero-knowledge proof (ZKP) solution will ensure the digital pound maintains a high level of privacy and security without increasing the risks of financial crime.
Although CBDCs have been hailed as the key to enhancing financial inclusion and payment efficiency, many people worry about their inherent privacy and security challenges, arguing that the government could easily turn them into a surveillance and monitoring tool.
Several jurisdictions have been exploring privacy-enhancing technologies (PETs) to mitigate surveillance concerns, but the issue remains a challenging task. Central banks must strike the right balance to maintain the necessary fraud and anti-money laundering (AML) prevention measures.
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