# Privacy-First CBDCs | Devcon SEA

- Channel: [Devcon](https://streameth.org/devcon)
- Date: 2025-10-07
- Duration: 25:39
- Watch: https://streameth.org/watch/yt-zNgmBX0c8yo
- YouTube: https://www.youtube.com/watch?v=zNgmBX0c8yo

## Description

This talk explores how central bank digital currencies (CBDCs) can leverage zero-knowledge proofs (ZKPs) and Ethereum to create privacy-centric monetary systems. We'll examine how ZKPs enable robust AML/CTF compliance while preserving user privacy, discuss the benefits of Ethereum deployment for financial inclusion and innovation, and showcase how these technologies could revolutionize digital currency design. Future CBDCs can and should offer unparalleled privacy, security, and functionality.

Speaker(s): Joe Andrews, Andre Omietanski
Skill level: Beginner
Track: Real World Ethereum
Keywords: Payment, Privacy, Zero-Knowledge

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Devcon is the Ethereum conference for developers, researchers, thinkers, and makers. 
Devcon SEA was held in Bangkok, Thailand on Nov 12 - Nov 15, 2024.
Devcon is organized and presented by the Ethereum Foundation. To find out more, please visit https://ethereum.foundation/

## Transcript

[Music] okay hello hello all right welcome everybody apparently I have the slide thing so there we go um welcome to the talk it's a it's a beginner level talk so we won't go into too much heavy technical detail but Joe you want to do what we'll cover yeah um hey everyone I'm Joe I'm one of the co-founders of Aztec um very happy to be here um with Andre uh I wanted to be a lawyer growing up so this is probably as close as I'm going to get but uh yeah we're going to go through today um kind of an overview of the different cbdc projects um that are going on in the world right now um you know our take on why the these are terrible um and kind of look at how maybe these can be redesigned uh with a privacy Focus um using some novel privacy preserving Technologies um yeah we'll kind of look at what it would take to launch a cbdc with like strong privacy guarantees on ethereum and then we'll do some key takeaways uh for you to kind of take away um and yeah just by of introduction I'm Andre General counsil I am for my sins a lawyer and I do not have the technical capability to be in Joe's shoes so uh I'm sorry also that you have to listen to a lawyer today uh talk but anyways um Joe you want to do the disclaimer since it's you you want to be be a lawyer so yeah um so yeah I think first of all like we don't endorse kind of like cbdcs in in their current form um we'll get on to this in a second but uh I think um Lots needs to change uh for them to actually be endorsed and and this presentation uh hopefully is going to go through um you know what it would take to build uh cbdc with strong privacy built into it at the core um and use that as like a platform to build kind of a new form of digital cache um and also a base layer for like pure government systems um and yeah Andre do you want to take the last Point yeah on the last Point uh this presentation is a Prelude to our report that going to come out next week so we're going to launch a 30 plus page report um on privacy for CD CBD uh so this presentation is effectively an executive summary of that so um and a preview right so let's go on to overview of cbdc projects um and what's been happening in the world as of September 2024 134 countries were and are exploring cbdc projects every G20 country is looking at these projects all Advanced um retail cbdc projects are intermediated through banks so they're not actually you know like ethereum fully trustless and and you know peer-to-peer three countries have fully launched the cbdc so the Bahamas um nice and warm Jamaica uh and and Nigeria and the digital Yuan the ecny is the largest cbdc pilot in the world and is exponentially growing as you will see in a second yeah I think the the key point on this slide is um most grass in crypto are down and to the right uh cbdcs are kind of uh their adoption is is almost exponential um you know we've got in the center uh the Nigerian cbdc um which has been around uh for the longest and as Andre was saying um the ecn why relatively new one but is also seeing exponential growth um so there's uptick here um and kind of it's about time we have an actual digital currency to play with and I think this shows the demand uh we just need to correct the implementation so so we we see a big rise in cbdcs in in interestingly kind of developing countries and obviously China which is a very developed country but some countries do not like cbdcs in particular uh this gentleman here um he has previously said that he will never allow the creation of a central bank Bank digital currency which in the US is called the digital dollar project um and it's a dangerous threat to Freedom not only because it's you you can you can you know revoke somebody's money with a with a click of a button but you can see every single transaction on chain if you're in the FED which is now potentially a dirty word so um I'd also just say he's also the first president um to Mint an nft uh so maybe he'll change his mind uh uh after his recent election successes we we do hope so so let's go into we've looked at 134 projects globally what's the three bullet point summary so you don't have to read a 50-page report um the bottom line is existing designs are not good enough they're intermediated they rely on existing Financial infrastructure to facilitate transactions they lack privacy they rely on existing Banks to store sensitive financial information and they lack interoperability you know they're not interoperable with um the digital you know the future of money that we're we're all working here um in the ethereum ecosystem um and yeah maybe um you know we we we can do better and I think you know Trump may change his mind um you know he launched that n project he may actually turn around and launch um potentially a cbdc as well yeah I think to kind of sum this up um my take on this is the um current set of cbdcs kind of at worst just an iteration of you know archaic banking infrastructure and if we move them on chain um uh without privacy they're a dystopia um you know think about every payment you made on the way to get here uh your your hotel um all of that's now public because it's in a cbdc uh that's not a world that I think anyone in this room wants to live in so yeah without privacy I think cbdcs are a dystopia um and hopefully the next few slides show that that's not the only way that is absolutely not the only way um and today we're going to go over um you know what a privacy first CB design will look like at a high level at a beginner level um and we'll start with our thesis yeah I think kind of going back to the drawing board is is the first point of the thesis um we have an opportunity to kind of redesign you know how money Works uh when people think about cbdcs um and we can kind of redesign cash uh in the same process um you know if we don't do this I think uh other kind of currencies will come up and replace this and so governments and institutions really do need to see this as an opportunity to redesign and preserve the status of crypto so um and yeah I think that these kind of like Technologies can be private by Design um and ethereum has all the tools today to launch these and our second part of the thesis is actually there's a huge opportunity for smaller Nations to experiment with really creative and Innovative and and you know privacy first designs and there's a few kind of um benefits that may acre as a result of that I think you know you look at some countries uh around the world for example in Europe um you have Montenegro which doesn't even have its own currency it's actually relying on the Euro but it's not part of the Euro zone so the there's examples of of countries around the world where if they would launch such a privacy for cbdc um they would gain incredible strategic geopolitical advantage and enhanced the global presence not only you know um physically but also virtually to you know to to kind of elevate them to a new level um and you could also design I think these these systems so that it's as that famous saying goes transparency for the government privacy for the people you could account for every single penny being spent by the government but every Everybody in the in the nation could effectively have privacy and have the the the freedom that that comes with that um you know embedded in in their system and I think the the third Point Joe you want to take that yeah I think like this third point about actually putting Central Bank assets on chain um like we all think like the US dollar is the current Global Reserve currency but there isn't like a digital Reserve currency like what's the one we flee to kind of onchain maybe Bitcoin um you know its price stays uh above 50k people like it but I think this is an opportunity for countries to actually link real digital assets to a central bank's balance sheet and that's incredibly exciting I think the the first country to really do this successfully um uh with these kind of tenants built into the the cbdc um can have a huge opportunity so I think um when we're talking about privacy first designs we need to do a bit of um high level analysis of well what privacy enhancing technology what pet colloquially will be the most um relevant to such a design so I'm I'm just going to go quickly through um a very um fine print lawyer written table analyzing various privacy enhancing Technologies and Joe kind of maybe uh give his technical View at the end but effectively in in our report that's coming out next week we have a detailed table just analyzing pretty much all of the existing privacy enhancing Technologies the description of it whether it's used in production um you know whether it's interoperable with existing banking infrastructure whether it's scalable whether it allows importantly which we'll get onto a bit later uh privacy respecting LL compliance uh and then finally and probably most importantly is this infrastructure trustless um and I think a lot of there's a lot of kind of wool being pulled over eyes um around this topic but you know which which technology is the best yeah and the way we kind of uh see this is like you know all these technologies have have their merits and different use cases but if we want to ensure kind of uh these these four tenants um are are kind of held in in the design of cbdc uh we think the only way today is to use Zer nage proofs um you know they've been around for the longest um they're used in production today uh people understand them uh there's talent in this room in other rooms in Devcon that know how to use them uh they can be used to program compliance into uh the currency um and they don't involve any third parties like if you trust the maps you trust open source cryptography um then you're good to go and that's kind of how The Internet's been built and maybe previous digital payments rely on such kind of trustless cryptography so the Next Generation should probably do the same and I think also um in the spirit of kind of defensive acceleration you you you need a a trustless um mathematically secure system uh to really achieve that diac um North Star so we we we truly and believe that zkps are are the way forward for this yeah I think just to summarize um I think they're the only solution that really um holds up those tenants and uh the next slides kind of uh assume basic knowledge of zero knowledge proofs and uh what you can do with circuits but uh we'll go into some of the details now so um let's apply zkps to cbdcs how will it look like how will it work but before we do that let's take a step back and have a look at how the ex existing system works um and just by way of kind of background I used to be one of the um work at a bank I was parachuted in for my law for my New York law firm based in London I was parachuted into Paris to help B&P pariba deal with one of the biggest kind of um sanction events that they've had in their in their history so they were they were sanctioned 10% of their annual revenues $9 billion and my task was to just kind of help fix it and make sure it it is prevented in the future and that required um working with a lot of compliance teams in the bank so I have an in-depth knowledge as to how compliance works even though I don't personally do compliance I'm I'm a lawyer um but the current model the current AML combating uh financing terrorism model is is inefficient ineffective and expensive there is as I have seen with my own eyes significant um you know Manual Labor uh involved in in checking um that everything is you know um correct and it's a significant cost and actually um there's been a study done four years ago um by Ronald pole in in the in in an Australian university University of Melbourne um and there four key conclusions one is that AML policy intervention intervention is less than .1% impact on criminal finances it's compliance costs exceed criminal funds and frankly taxpayers and orderly citizens are penalized and in Europe AML requirements necessitate higher costs than actually the amount recovered from Criminal uh criminal uh criminals by authorities so in short cryptographic compliance is better than Harold and there's a better way to do it yeah I think of kind of the old model as like it's reactive compliance something happens someone checks it and then they're like hang on something may be wrong here um you're always playing catch up and I think in a zkp model um we can kind of flip that on its head uh and do proactive compliance what if you could bake into the actual transaction compliance checks uh that were completely privacy preserving you'd be able to eliminate um most of the kind of manual checks that happen today and also make a system where kind of AML uh was much much much harder um if you haven't seen already there's kind of proof of passports uh are now possible in zkps there's a booth over in the kind of uh devcom booth area where you can scan your passport and create a zero knowledge proof uh of any e passport um to prove you're a member of that country prove you know uh what your name is your date of birth you can even prove you're not on a sanctions list using this uh technology and so the way this kind of works in practice is inside the logic of a transaction like you could take a dollar uh I want to pay Andre some dollars before I pay him um I have to prove I'm not on a sanctions list I can prove that my total monthly sends to all other users in the system below 10K um and if all of those checks pass um all in complete privacy I can send him $10 um and so I think it's a much uh more elegant system system because the transaction codifies the rules of the system uh and you can still maintain strong privacy in the process and it's more effective cheaper quicker I think that model will actually banks will kind of realize that model is more effective and they'll actually gravitate towards it themselves um but how do we comply with laws you might ask well again I think Joe explained you know zkps can be used to comply with with you know you can you you can create a zkp to comply and the types of laws you will need to comply with is customer due diligence enhanced due diligence uh ongoing transaction monitoring suspicious activity reporting sanction screening um and our upcoming report uh for all you um um you know want to be lawyers or or if you really love reading really long tables and texts we've actually mapped it out we've actually looked at every single um we looked at some countries the UK Montenegro Thailand and um and Switzerland to see how you could actually create a cbdc in those countries complying with the with with existing laws I think like sometimes you know zkps or new ways of doing uh privacy preserving kyc and AML gets gets a lot of push back um it's kind of it's stuck in the present as like you know this is not how it's done today uh but I think the key Point here is you know the laws for cbdcs are still being written there's only three that are live and there's none uh on a blockchain um so new laws have to be created uh to create this cbdc and in the process uh we can adopt a much better way of doing kind of kyc and AML um and create a much better uh payment system as a result so for example a snippet from our report um we go through every single law in the UK Thailand Switzerland Montenegro and map out how those laws can be codified in zkps uh and interestingly for example in Thailand there's a requirement um for kyc if you make a transaction over 50,000 bats again you could have that as a you know structured so that if you go above that threshold you need to provide some proof proof of passport uh go to the booth check it out uh and and you know you could you could prove that you you have an identity in your kyc effectively um so again I'll just go through the slides we're not going to go into detail but again that that's that's the selling point of zkps you can automate it make it cheaper more effective um and future proof I think like one thing that always happens in these presentations is people talk about a technology that's you know a couple of years away um you know have to do some pilots and test this out but I I think it's worth stressing that we can do this today and there's enormous benefits from actually doing this on on ethereum um if we go to the next slide I think um for the last 8 10 years like the whole defi industry on ethereum has been battle tested you know yes there's been hacks there's been issues but we now have very robust um trading venues such as Unis swap we have uh huge hugely successful lending markets r a compound um all this infrastructure uh already exists and all it needs is real world assets rather than kind of ass that are derived from you know um the ethereum kind of native currency or bridged assets like usdc um where someone else is kind of uh you know giving those assets value and I think like leveraging uh ethereum's kind of legacy and all of the things that have already been created uh means it's the perfect place to launch one of these currencies let's go to summary of key takeaways um if there's there's a few things that you come out of this talk um here here are the things yeah I think I'll say this point again um you know existing cbdc designs especially if they're moved on chain are a dystopia um you know they're not a world uh that anyone I think who's who's come to Devcon wants to live in and we have a chance to create that Utopia but we have to kind of put some of these learnings uh into practice um and yeah as I said before um we can do this today on ethereum the technology exists um it's been iterated on for the last you know 3 to 5 years ckps are performant enough to prove all the things that are needed today and so we can make a much better Financial uh system and I think the last point I think the first mover Advantage is absolutely underrated and it is a huge opportunity for Nations to effectively be the first and reap asymmetric geopolitical finan you know economic rewards if if they launch a privacy first cbdc on ethereum so stay tuned for our report uh which is coming out um I think it's next week actually and we're very excited to have um have you know given you some of our knowledge and our our vision around this and very much open to questions I think you can uh scan the QR codee for questions maybe all right thank you you guys so we have a Q&A session is we see some question pop up over there already all right you guys want to start from the the first question uh maybe I can start and Andre can fill in um so one of the key requirements in kind of uh the bank of England's kind of initial consultation uh for its digital pound was privacy like the the bank of England doesn't want to know what the citizens are up to it wants to kind of have intermediaries that do that other other mechanisms that kind of Ensure compliance so uh in that case yeah the government doesn't they expressly kind of do care about privacy and they don't want to know um about you know users's personal information because it leaves them open to another form of attack yeah and just to um add to that so part of our privacy first cbdc report that's coming out is actually built on the work we've done in trying to educate the bank of England last year on how to design a cbdc with privacy by Design and um I think it also ties into the second question I think governments are realizing they need cbdcs because the current systems are are fallible um they're slow they're not 24-hour um and they they want to they want to go on chain but on their terms and we've actually tried to educate the Bank of England on you know focusing on zkps so that they have the best-in-class Privacy uh By Design do you want to take the Eurozone one um Can individual Eurozone members do a cbdc uh on their own by law so um good question um I haven't off the top of my head I don't want to give it um an answer because I think there there may be some ma issues I know that they can um I know you know that they can consider doing that obviously I mean if they're not part of the Euro Zone if they if they have for example their own currency and they're not part of the Euro Zone they would have to obviously exit the Euro Zone to launch their own cbdc um and then they could pass their own laws to to enable that cbdc so again using Montenegro as an example Montenegro um is not part of the Euro Zone um but if they were they would have to leave it and even if they were to issue a cbdc they would have to change laws to enable the creation of a cbdc in any case so the bottom line is um Can individual usone members do their own cbdc yes because they can remove themselves from the Euro Zone pass laws that enable cbdc um and create their own future effectively yeah we got uh 40 seconds for the last one uh a little bit spicy um very we're still working uh on Aztec uh we're pretty close to testnet um so yeah we'll be launching kind of the first programmable privacy Network on ethereum um you know you could use part of that to uh create these cbdcs um for me personally like we get approached by a lot of people to to work on cbdcs then I just see it as a opportunity to not create the dystopia like there's kind of two paths in the road we can stay in kind of like our our crypto Lane and pretend that we're all going to transact in ethereum and like these assets or we can try and bring this technology to the masses and you know that that's why I'm here so uh yeah hopefully that answers the question all right that's awesome you guys keep Ross for the speakers on St please thank you guys amazing