Nuggets, a self-sovereign identity, and payment platform, recently announced that it is working with the Bank of England on a technology experiment to design a possible privacy and identity layer for the UK’s Central Bank Digital Currency (CBDC).
If a CBDC – also known as the digital pound – were introduced, the identity layer “would help empower users to maintain privacy and control their own data.”
The intention is to design a system “that is private and secure and prevents tracking and correlation of transactions while maintaining the highest standards of fraud and anti-money laundering prevention.”
Already, countries worldwide are “moving ahead in their CBDC ambitions, with the UK Treasury and Bank of England stating that their CBDC could be launched at the latter end of the decade.”
However, while promising “to increase financial inclusion and facilitate easier and cheaper cross-border payments, CBDCs face inherent privacy and security challenges.”
CBDCs have at times faced criticism “surrounding the risks they pose concerning individuals privacy and the possibility of monitoring.” Bank of England officials have echoed these concerns, noting that “privacy and potential to monitor citizens top the list of worries” surrounding CBDCs.”
By implementing Zero-Knowledge proofs (ZKPs), “a cryptographic breakthrough that allows the ability to validate information without exposing the underlying data, anyone can confirm their identity while staying in complete control over who accesses their data — safeguarding their privacy and mitigating CBDC surveillance concerns.”
One of the main benefits of the identity layer “lies in establishing a secure non-correlatable connection through Peer DIDs, a unique and confidential one-off identifier associated with an individual.”
This enables the exchange of verified credentials “that let users confirm their identity and comply with Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations.”
Once the account is set up, users can “make CBDC payments and verify themselves privately without needing to go through KYC or AML processes or provide additional proof of their identity.”
Alastair Johnson, founder and CEO of Nuggets, said:
“We are honored to be selected by the Bank of England to provide the solutions for safeguarding individual privacy. Nuggets is working to better ascertain and test various use cases and solutions aimed at making CBDC operations more private and secure for everyday users. It’s an excellent opportunity with the dawn of a new monetary system to be able to get it right from the beginning through the use of identity that’s owned and controlled by the user with privacy, security and no tracking or correlation. A digital pound, a private pound.”
As noted in the update, Nuggets is an identity super-wallet, “delivering verified self-sovereign, decentralized identity, compliance, and multi-rail payment with zero friction.”
Nuggets is built “for Web2, Web3, and DeFi.”
It provides “a reusable, interoperable decentralized identity with a merit-based reputation that travels with you. As well as a non-custodial cache for your digital assets.”
