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Privacy-enhancing technologies for digital payments: mapping the landscape

Author

Listed:
  • Raphael Auer
  • Rainer Böhme
  • Jeremy Clark
  • Didem Demirag

Abstract

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.

Suggested Citation

  • Raphael Auer & Rainer Böhme & Jeremy Clark & Didem Demirag, 2025. "Privacy-enhancing technologies for digital payments: mapping the landscape," BIS Working Papers 1242, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1242
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    More about this item

    Keywords

    privacy; privacy-enhancing technology; payments; BigTech; fintech; regulation; smart contracts; zero-knowledge proofs; applied cryptography; digital money; digital currency; stablecoins;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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