Relaxed Sender Anonymity for CBDC Interbank Settlement: A Zero-Knowledge Approach on Permissioned EVM
2026-08-28 • Cryptography and Security
Cryptography and SecurityDistributed, Parallel, and Cluster Computing
AI summaryⓘ
The authors address a problem with digital money systems for banks that use blockchain technology: while blockchains are transparent and easy to verify, they reveal sensitive transaction details. They propose a solution where the sender is known for regulatory reasons, but the receiver and transaction details are hidden using cryptographic methods. Their system runs on a special blockchain setup and uses advanced proofs and encryption to keep information confidential without needing outside trusted parties. Tests with real bank participants show the system works quickly and efficiently. Some privacy trade-offs remain due to how events are recorded, but these are fixable in future versions.
Central Bank Digital CurrencyDistributed Ledger TechnologyZero-Knowledge ProofsHyperledger BesuEthereum Virtual MachineGroth16Merkle TreeECIES EncryptionAML/CFT CompliancePermissioned Blockchain
Authors
Pietro Tiberi, Gabriele Marcelli, Vitangelo Lasorella
Abstract
Central Bank Digital Currency (CBDC) interbank settlement systems operating on Distributed Ledger Technology (DLT) face a fundamental trade-off: blockchain transparency enables trustless verification but exposes commercially sensitive bilateral transaction flows to all network participants. We propose a confidential interbank settlement protocol for permissioned Ethereum-compatible networks that resolves this tension through a relaxed sender anonymity model tailored to regulatory AML/CFT requirements. In this model, the initiating institution remains publicly identifiable on-chain for accountability and compliance, while the receiving institution, transfer amount, and business payload are cryptographically obfuscated. We realize the protocol on Hyperledger Besu using QBFT consensus, combining Groth16 zero-knowledge proofs over BN254, Poseidon hash commitments in an incremental Merkle tree, multi-recipient ECIES payload encryption, and an on-chain NoteRegistry contract that stores encrypted notes as an append-only ledger log, eliminating trusted off-chain custody servers. The protocol supports shield, confidential transfer, and unshield state transitions. Experimental evaluation across a five-node network (three commercial banks, a central bank operator, and a securities depository) demonstrates end-to-end settlement in 8-16 s, proof verification overhead of about 1 ms (around 220k gas) via EVM precompiles, and client proof generation in 4-12 s on commodity ARM hardware. While receiver confidentiality is established at the protocol level, the current proof-of-concept NoteRegistry uses owner-indexed events, a trade-off addressable in production via uniform event broadcasting.