Cash-like privacy and compliance with anti-money laundering regulations can coexist in a private fiat stablecoin built on zero-knowledge proofs. With MiCA in effect from March 12, 2025 and a new EU AML package still under discussion at the institutional level European Commission, 2025 has been confirmed as the year when this architecture can become both technically feasible and regulatory coherent.
MiCA is operational from March 12, 2025, and many technical provisions for digital assets are now subject to implementation guidelines by national authorities.
In the technical and regulatory review work conducted on proof-of-concept of private stablecoin (2023–2025), industry analysts and security teams found that the integration of ZKP requires pragmatic compromises between latency and usability, but can be made compliant with limit policies and escalation mechanisms. According to data collected during internal audits and testnets, the use of secure elements and verifiable credentials significantly reduces exposure to key thefts and facilitates controlled revocation processes.
The goal is to enable digital payments with “cash-like” privacy combined with automated anti-money laundering controls. The model combines Zero-Knowledge Proof (ZKP), verifiable credentials, and operational limits to balance user privacy with regulatory requirements.
This results in a private lane on an already regulated fiat stablecoin, alongside transparent accounts. In this context, the private lane preserves data and unlocks only upon exceeding predefined thresholds and in compliance with predetermined rules.
Alice sends 50 euros to Bob privately. The wallets generate zk‑SNARK (ZKP) that attest to three essential elements: sufficient balance, valid credential, and compliance with operational limits. Validators verify the proofs and record on‑chain only the commitment and the nullifier, without revealing identities or amounts.
If a rule is violated, it triggers a move to further checks (enhanced KYC), keeping the controls proportionate to the risk.
Zero-Knowledge Proofs allow for demonstrating compliance with specific rules (balance, thresholds, turnover) without exposing sensitive data. That said, the network only observes that the constraints are met, without knowing “how much” or “who”.
Thus, transparency towards validators translates into systemic security, while user privacy remains intact within agreed parameters.
The user has a transparent account and can activate a private stablecoin account. The switch to the private lane occurs through the transfer of tokens from the public account to the private one.
Each person can open only one private account, linked to a verifiable credential issued by the issuer or authorized third parties. This limitation reduces the risk of money mule activities and allows regulatory traceability without exposing sensitive data.
Limits can be configured per transaction, balance, and monthly turnover. A ZKP can certify, for example, that the amount is less than 1,000 euros without revealing the exact figure or that the turnover of the last 30 days remains below a predetermined threshold.
If the transaction exceeds these limits, the wallet requires additional identification. In fact, this approach reconciles the proportionality of controls with the efficiency of low-friction daily payments.
Digital credentials (KYC/KYB) allow validators to verify the status of the subject without accessing personal data. ZKPs demonstrate that the ID is not revoked and that the sender does not appear on sanction lists.
The design supports the GAFI/FATF Travel Rule for amounts exceeding the specified thresholds, while maintaining minimal friction and effective data protection for micropayments.
At onboarding, credentials can be issued by the issuer or authorized partners. Integration with national IDs and eIDAS 2.0 (EU Digital Identity Wallet) is underway and, in the future, will enable a strong link between identity and the use of the private account, without exposing transactional data.
The private stablecoin could bridge the gap between a cash-like experience and regulatory compliance. In this context, it can enable private P2P payments and DeFi services with on-chain applicable policies.
The main challenges include generating fast ZKPs on smartphones, reducing on-chain verification costs, and updating circuits without compromising privacy. Techniques such as proof aggregation, recursion, and off-chain verifications can help scale the system.
The paper proposes the use of the Mina Protocol – technical docs as a technical basis for lightweight on‑chain verifications and cites optimizations such as SnarkPack and Caulk. A proof‑of‑concept is expected on the etonec repositories, available at github.com/etonec.
The convergence between ZKP, verifiable credentials, and an account-based model makes the idea of a private fiat stablecoin capable of combining privacy and AML/CFT controls credible. The year 2025 marked the beginning of significant regulatory and technical references; while scalability and node usability remain a challenge, the technological direction now appears outlined and ready for pilot-scale experiments.


