The research noted that ZK Proofs can provide a better nature to the CBDCs to behave more likely to cash.
The Central Bank Digital Currency (CBDCs) is a concept of centralised digital currency. In the present time, the majority of the Central Banks are working on their respective CBDC, or say national digital currency, to gain better modernization in the existing traditional digital payment system.
In the past couple of years, the development & introduction of national CBDC showed significant competition among the central banks. In particular, United States’ digital dollar concept grabbed huge popularity & also huge criticism because of the features & privacy policies. Many experts claimed that the US government will control digital money with CBDC and people will not be able to use their money like cash. However US digital dollar is only under a hypothetical world and real digital dollar is very far from the current time but still people are not feeling good because they believe that CBDC can’t replace physical cash & it may be a worste thing over Bitcoin like Crypto assets.
On 15 December, Mina Foundation, a decentralised network, and Ethnic, a crypto payments group, published a report on behalf of research conducted by their experts.
The research noted that Zero-knowledge (ZK) proofs could solve the privacy problem of CBDCs.
According to researchers, if ZK will be introduced in the CBDCs blockchain then we will be able to provide full privacy to CBDC users easily and the whole thing will happen under a cryptographic algorithm.
In short, ZK Proofs can provide full trust to the CBDC users that their financial activities with the use of CBDC-based payments are fully anonymous to others. Alternatively, as an example, the US fed will not be able to detect the identity of a particular person & also will not be able to track it, but surely it will be a very big question under the environment of regulatory frameworks because such anonymity can be misused.
Jonas Gross, head of digital assets and currencies at Etonec and chairman of the Digital Euro Association, said:
“Providing anonymity for payments, while ensuring regulatory compliance, is not a technological question, but a policy question.”
It is worth noting that in the last 1 year of the time frame, law experts from the US, and EU submitted their proposed bill to ensure that CBDC will behave like physical cash & no one will be able to control the fund’s flow.
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Zk proofs can solve the privacy issue of CBDCs