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The Bank of England (BoE) published a joint report with MIT Digital Currency Initiative (DCI) on how privacy enhancing technologies (PETs) could be used to enhance the privacy of a potential digital pound. The paper focused on pseudonymization, zero-knowledge proofs, and secure multiparty computing. It found that these technologies present opportunities for a central bank digital currency (CBDC) to be at least as private as current forms of digital money and potentially even more private as they mature. While PETs, on their own, do not guarantee privacy, the approaches explored in this paper seek to safeguard consumers' private information, enable compliance with existing regulations, and strengthen trust and confidence in a digital pound, should one be launched in the future.

"This paper presents zkLedger, the first system to protect ledger participants' privacy and provide fast, provably correct auditing. Banks create digital asset transactions that are visible only to the organizations party to the transaction, but are publicly verifiable. An auditor sends queries to banks, for example "What is the outstanding amount of a certain digital asset on your balance sheet?" and gets a response and cryptographic assurance that the response is correct. zkLedger has two important benefits over previous work. First, zkLedger provides fast, rich auditing with a new proof scheme using Schnorr-type non-interactive zero-knowledge proofs. Unlike zk-SNARKs, our techniques do not require trusted setup and only rely on widely-used cryptographic assumptions. Second, zkLedger provides completeness; it uses a columnar ledger construction so that banks cannot hide transactions from the auditor, and participants can use rolling caches to produce and verify answers quickly. We implement a distributed version of zkLedger that can produce provably correct answers to auditor queries on a ledger with a hundred thousand transactions in less than 10 milliseconds."

"In this 2024 paper we propose, implement, and evaluate two extensions to OpenCBDC, an open-source transaction processor designed for central bank digital currency. First, we enable the central bank to audit the monetary supply. This feature reduces the trust required in sentinels - the most exposed components of this architecture - so that it can in principle be outsourced to intermediaries. Second, we leverage Pedersen commitments and zero-knowledge range proofs to hide transaction amounts while maintaining auditability. This feature improves privacy beyond the level offered by the original OpenCBDC design. Performance measurements show that auditability and privacy reduce the throughput of the shards to 30 % of the original, but the scalability remains close-to-linear in the number of shards. For example, 8 shards can process peak loads of ≈135,000 transactions per second. By adjusting resources, CBDC operators can meet their throughput goals with auditability and privacy."