Privacy-enhancing technologies are central to the CBDC privacy debate

In the debate over a digital euro, privacy-enhancing technologies (PETs) are often presented as the solution to the tension between individual privacy and the need to prevent illicit financial activity . Cryptographic techniques like zero-knowledge proofs (ZKPs) are being actively researched and piloted by central banks as they could allow a transaction to be verified as legitimate without revealing the identities of the parties or the full transaction details . This approach aims to replicate the key privacy feature of cash in a digital environment. Similarly, technologies like secure multi-party computation and homomorphic encryption are being evaluated for their potential to enable data sharing and analytics while maintaining the confidentiality of the underlying personal data . However, the integration of these technically complex tools is not without challenges. They must be proven to be scalable, secure against cyberattacks, and practical for use in a mass-market payment system, making the feasibility of a truly privacy-preserving CBDC a subject of ongoing research and pilot programs.