Balancing Privacy and Compliance in Financial Transactions Using Zero-Knowledge Proofs

Uchil, Lohit Dinesh (2025) Balancing Privacy and Compliance in Financial Transactions Using Zero-Knowledge Proofs. Masters thesis, Dublin, National College of Ireland.

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Abstract

Digital financial transactions face a fundamental conflict between ensuring user privacy and enforcing regulatory compliance (e.g., KYC/AML). This research addresses the challenge of designing a system that can achieve both. The primary objective was to determine the conceptual soundness and performative viability of a Zero-Knowledge Proof (ZKP) system for enforcing compliance checks while maintaining transactional anonymity. A mixed-method approach was employed. Initially, a conceptual ZKP circuit for whitelist membership, leveraging Merkle trees, was prototyped and benchmarked using Python. The empirical data from this prototyping then informed a large-scale discrete-event simulation in SimPy, which modeled the system's performance, measuring throughput and latency under various loads. The simulation demonstrated that for efficient ZKP schemes, such as Merkle proofs, the verification process does not pose a significant performance bottleneck. System throughput was found to scale linearly with user activity. Furthermore, a qualitative demonstration confirmed the architecture's ability to successfully enforce compliance by blocking non-whitelisted users while preserving participant anonymity on a public ledger. This research concludes that a ZKP-based system for private financial compliance is both conceptually sound and performantly feasible. The main hurdles to real-world adoption are likely to be in engineering integration and regulatory acceptance, rather than inherent performance limitations of the core ZKP logic.

Item Type:	Thesis (Masters)
Supervisors:	Name Email Cosgrave, Noel UNSPECIFIED
Uncontrolled Keywords:	privacy; compliance; financial transactions; zero-knowledge proofs (ZKPs); regulatory; anonymity; throughput; latency; performance; simulation; prototyping; FinTech; Merkle proofs; KYC; AML; selective disclosure
Subjects:	H Social Sciences > HG Finance K Law > KDK Republic of Ireland > Data Protection H Social Sciences > HG Finance > Fintech T Technology > T Technology (General) > Information Technology > Fintech
Divisions:	School of Computing > Master of Science in FinTech
Depositing User:	Ciara O'Brien
Date Deposited:	20 Aug 2026 13:09
Last Modified:	20 Aug 2026 13:09
URI:	https://norma.ncirl.ie/id/eprint/9583

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