The increasing use of digital payments, smartphones and data-driven technologies makes privacy a critical issue in the public policy discussion of digital money. This BIS working paper explore how technology can address these concerns, offering a comprehensive evaluation of privacy-enhancing technologies for large-scale payment systems.
The authors systematically analyse the trade-offs involved in implementing privacy-enhancing technologies. Unlike previous studies that often treat privacy and transparency as mutually exclusive, the authors investigate more sophisticated approaches that can balance both objectives. They introduce a detailed taxonomy of privacy solutions, covering both technology-based and institution-based approaches.
They analysis includes privacy metrics and technologies such as zero-knowledge proofs, homomorphic encryption, multi-party computation, anonymity-enhanced signatures, tamper-resistant hardware, trusted computing and metrics like k-anonymity and differential privacy.
The authors highlight the inherent trade-offs between privacy, auditability and performance in digital payment systems. For example, zero-knowledge proofs can verify information without revealing it, offering strong privacy protection.
However, current metrics and technologies are still computationally intensive and can slow down system performance substantially.
„We emphasise the importance of both „hard privacy” (achieved through cryptographic methods and user-controlled data) and „soft privacy” (enforced through institutional controls and data protection policies). While some technological solutions for hard privacy show significant promise, further development is necessary to overcome current performance challenges. We conclude by examining a hybrid approach that combines hard and soft privacy measures to develop robust, scalable and privacy-preserving digital payment systems.” – the authors explained.
How can technology enhance privacy in digital payment systems? This paper presents a systematic evaluation of the interests of privacy-conscious users, commercial data holders, and law enforcement. We classify privacy-enhancing designs along the dimensions of privacy versus auditability, as well as soft institution-based versus hard technology-based solutions. We map existing technologies into this taxonomy and assess them.
Sophisticated techniques allow having both hard privacy and limited transparency by employing hard-coded rules that dictate which data remains inaccessible. On balance, there is promise in novel concepts like modern zero-knowledge-proofs, but current technologies also suffer from limitations in terms of security and computational capacity.
More technological development is needed in this area. Additionally, efforts could focus on technological development that augments such hard privacy with technologically-enforced access control and systems minimizing the amount of data that is being stored, render abuse transparent and make data holders accountable.
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BIS Working Papers No 1242 – Privacy-enhancing technologies for digital payments: mapping the landscape
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
