ZK-Based Banking Services: Necessity for Privacy and Security

Abstract

Traditional banking systems rely heavily on centralized data storage and identity verification processes, leading to security vulnerabilities and regulatory burdens. Zero-Knowledge Proof (ZKP) technologies offer a cryptographic solution that enables financial verification-such as identity authentication, balance confirmation, and transaction validation-without disclosing sensitive user data. This paper explores the integration of zk-SNARK and zk-STARK protocols, ZK-Rollup-based scalability solutions, and zkLedger applications within banking operations. It examines the role of selective disclosure mechanisms in critical areas such as KYC/AML compliance, balance verification, cross-border transactions, and regulatory audits. Furthermore, a four-layer architectural model is proposed to facilitate the seamless integration of ZKP-based frameworks into traditional banking infrastructures, addressing key aspects such as security optimizations, transaction costs, and scalability. Lastly, the potential of ZKP in regulatory compliance, its bridging role between DeFi and centralized banking, and the emergence of ZKP-driven next-generation banking services are discussed.