Joint report by Nethermind and Deutsche Bank

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Intro

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Zero-knowledge proofs are moving from academic concept to production infrastructure faster than most financial institutions realize. The new Deutsche Bank x Nethermind report argues that institutions that delay adoption risk falling behind as digital assets mature.

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The regulatory landscape is accelerating this shift. eIDAS in the EU and UK establishes the framework for digital identity and authentication. In the United States, the GENIUS Act will apply Bank Secrecy Act requirements to stablecoin issuers. Privacy, compliance, and verifiable computation are converging into a single technical requirement.

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Unlike theoretical explainers, this 43-page report examines live deployments across central banks, exchanges, and enterprise pilots. It documents what works, what does not, and which areas require immediate industry alignment.

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Key Takeaways

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1. ZKPs enable privacy and compliance together

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A zero-knowledge proof lets one party prove a fact without exposing underlying data. ZKPs allow institutions to keep trading flows, customer positions, and proprietary strategies private while proving AML and sanctions compliance. Rules can be embedded directly into the proof, including threshold checks and non-membership tests for blocklists.

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2. Four high-impact use cases are emerging

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1. ‍Private on-chain transactions: Institutions can use public blockchains without exposing sensitive information. The European Data Protection Board advises that personal data should not be processed on-chain. ZKPs allow institutions to keep data off-chain while proving statements through hashed commitments.
2. ‍KYC and AML with verifiable credentials: Users prove attributes such as age or KYC status without sharing raw documents. This reduces data liability and enables instant onboarding. Google and Sparkasse banks have already deployed ZK-based age verification in Google Wallet.‍
3. Proof of reserves: ZKP-based PoR allows institutions to prove solvency without exposing customer balances or commercial data. OKX's monthly PoR attestations show this model is becoming operational practice.‍
4. Blockchain scaling: ZK-rollups increase throughput from dozens to thousands of transactions per second while inheriting Layer 1 security. INTMAX2 demonstrates high-throughput stateless rollups, and Nethermind formally verified its financial safety properties in Lean.

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3. Real implementations show both progress and friction

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The report reviews deployments across the Bank of England and MIT, BIS Project Tourbillon, the Deutsche Bank and Privado ID proof-of-concept, and PoR systems from Binance and OKX.

One key finding from BIS testing stands out: strict privacy and strict security are not always compatible. EC1 offered unconditional payer anonymity while EC2 provided stronger protection against counterfeiting. Institutions will need to choose the appropriate design for their regulatory environment.

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4. Three barriers block production adoption

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1. Talent: There is a global shortage of engineers with ZKP expertise. zkVMs are reducing this barrier by letting developers write provable applications in familiar languages.
2. Computational overhead: Proof generation is costly. Hardware acceleration using ASICs and FPGAs is emerging as the long-term solution.
3. Compliance: Institutions must respond to lawful requests. Full anonymity is not compliant. Controlled disclosure mechanisms will be required in production systems.

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The road ahead

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Three convergence trends are accelerating ZKP adoption: zkVMs that abstract circuit design, hardware acceleration for proof generation, and standardisation efforts led by NIST and ZKProof.org.

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The report argues that financial institutions now face a clear choice: continue experimenting or begin designing production-grade privacy and compliance models that leverage zero-knowledge proofs.

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What is inside the full report

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• Technical foundations for zk-SNARKs, zk-STARKs, and zkVMs
• Comparison tables mapping use cases to business problems and constraints
• Seven case studies from central banks, exchanges, and enterprise pilots
• Implementation guidance for private transactions, digital identity, PoR, and scaling

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→ Read the full report here

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