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

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Researchers at German crypto blockchain-based payments fintech etonec and others have proposed using zero-knowledge proofs to ensure regulatory compliance and privacy in stablecoins. They have developed a design that allows fiat-based stablecoins to be used as cash within limits.

The researchers’ design allows for multiple limits, such as transaction limits, balance limits, and turnover limits, and enables anti-money laundering (AML) and counter-financing of terrorism (CFT) compliance by using zero-knowledge sources. Especially zk-SNARK (Zero-Knowledge Abbreviation Non-Interactive Argument from Knowledge). Below preset thresholds, transactions are invisible to third parties.

According to researchers Report:

“In essence, our goal is to create a stablecoin that offers privacy guarantees similar to the privacy coin Zcash or mixer Tornado Cash, but without the regulatory challenges associated with money laundering and terrorist financing.”

In this account-based model, users create their own ZKPs (presumably using zero-knowledge protocols, although the abstraction is not defined), then use unique digital identities to send a source of funds to the blockchain, where validators verify and add ZKPs. Transaction to ledger. Identity can be established by the government or a third party.

Related: Into the Storm: The Dark World of Cryptocurrency Mixers

Balancing digital privacy and AML/CFT compliance is the topic of current debate In the United States and the European Union. The researchers say their system may be viable Linked to Europe’s eIDASElectronic Identification System, when that system is finalised.

In addition to Etonek, participants in the research included the San Francisco-based Mina Foundation, operator of the Mina protocol; The German Hauck Aufhäuser Lampe Bank and the Interdisciplinary Center for Security, Reliability and Trust of the University of Luxembourg. Mina is notable for its claim of being the “world’s lightest blockchain”. Consume external information Without an oracle.



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