Zero-knowledge proof framework for privacy-preserving financial compliance

Abstract

This article presents a minimal viable product (MVP) architecture and proof-of-concept implementation that leverages zero-knowledge proofs to conduct essential KYC checks on a blockchain network without disclosing sensitive user information. The design employs a trusted off-chain KYC provider to validate user credentials, then uses succinct cryptographic proofs, compiled and verified with Groth16, Circom, and snarkjs, to guarantee compliance on-chain. A single smart contract deployed on a test network (Sepolia) verifies these proofs while insulating personal data from public exposure. The article outlines a practical off-chain/on-chain data flow, discusses essential performance metrics such as proof generation time and gas costs, and describes limited user testing for qualitative feedback. By integrating regulated AML checks with privacy-oriented ZKP protocols, this work demonstrates that decentralized applications can satisfy stringent compliance standards while upholding the confidentiality of user identities.