InvestIndependently confirmed2 publishers2 min readPublished
BIS Aurum prototype confines a bank breach to that bank's own customers
BIS's Project Aurum Phase 2 prototype hides payer, payee and amount with zero-knowledge proofs while keeping anti-money-laundering checks. That moves the privacy guarantee from a central bank's pledge to the system's design, but the BIS says the stack is not yet production ready.
The Investor · Invest desk
Banks sign users up, verify identity and keep records; the central bank would not have access to those records. A compromised bank may expose its own customer data, not identities from other counterparties. A validator-level compromise alone would not expose end users.
- capability Regular banks Sign people up, verify their identity and keep their records, claim 10
- constraint Central bank Would not have access to the identity information and records that banks keep, claim 17
- exposure A compromised bank May expose its own customer data, but not customer identities from other counterparties, claim 12
- constraint Validators A validator-level compromise alone would not be enough to expose end users, claim 12
| Who | How | Kind | Claim |
|---|---|---|---|
| Regular banks | Sign people up, verify their identity and keep their records | capability | 10 |
| Central bank | Would not have access to the identity information and records that banks keep | constraint | 17 |
| A compromised bank | May expose its own customer data, but not customer identities from other counterparties | exposure | 12 |
| Validators | A validator-level compromise alone would not be enough to expose end users | constraint | 12 |
What happened
- The BIS Innovation Hub built Phase 2 with the Hong Kong Monetary Authority and other institutions, on top of the original Aurum codebase.
- Users would sign up through their regular banks, which verify identity and keep the records.
- The BIS found that compromising one bank may expose that bank's customer data but not customer identities held through other counterparties, and a validator-level compromise alone would not expose end users.
- The report admits stronger privacy can make transactions slower, programmable features harder to build and lost wallets harder to recover.
Why it matters
- contradiction The framing is that trust moves from promises to technology. Personal details still come out when the law demands them, and that final layer is a legal rule.
- cost Enrolling banks keep the identity records. The work and the breach risk the BIS highlights sit with them, not with a central bank.
- decision An issuer that wants programmable features or lost-wallet recovery has to give up part of the privacy. That choice is made at design time, before any user holds a wallet.
- precedent Brazil's 2023 code release shows outsiders read CBDC code fast: freeze-or-reduce mechanisms surfaced within days, so a privacy claim written in code can be checked on the same timescale.
In 2020, BIS general manager Agustín Carstens said on an IMF panel that a CBDC would give the issuer "absolute control on the rules and regulations" governing its use [3]. In August 2026, European Central Bank board member Piero Cipollone said the digital euro would deliver the maximum level of privacy of any current technology and that the Eurosystem could not structurally link people to their transactions [4]. Epicenter.works, an Austrian digital rights group, joined other civil society groups in a statement warning that legislative promises on the digital euro can be reinterpreted or broken [5].
Cipollone's claim is phrased as architecture too, so the line between a pledge and a design comes down to whether an outsider can test it. The BIS wrote that digital cash can achieve "cash-like privacy" [15], under what it calls a balanced approach between complete anonymity and full transaction transparency [16]. Neither account says whether the Aurum code is public, and neither gives transaction speeds.
The privacy layer could reach an issuer intact. It could arrive with a freeze or reporting function added later. Or an issuer could drop it to get the features the report concedes are harder to build [13]. On the record we think dilution is the likelier path. When Jeff Nijsse and Andrea Pinto reviewed 20 CBDC projects, the privacy promised in early proposals was usually weakened by the time the system launched [14].
The counter-thesis is architectural. The central bank has no access to the identity records banks keep [17], so it has no data to hand over and none to misuse, and a later move to look would need a change in law or in the system itself.
Project Aurum is yet to be released or used commercially [8]. No issuer has yet had to accept any of the trade-offs. That leaves the 20-project record as the only base rate on offer. We would be wrong if the first issuer to adopt the design ships the zero-knowledge layer intact with those costs accepted, or if outside review of the code finds no function that lets the central bank freeze or reduce wallet balances.
What to watch
- Whether the BIS or HKMA publishes the Aurum Phase 2 code for outside review, and whether any freeze or balance-reduction function turns up in it.
- Whether a central bank names the Aurum design in a pilot, and which of the three listed costs it accepts or engineers away.
- Whether the digital euro legislation keeps the structural unlinkability Cipollone described, the point Epicenter.works and other groups contest.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence45
- Adoption3
- Hype gap+20
- Incentives
- Insufficient
- Confidence60
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The BIS Innovation Hub released Project Aurum Phase 2, a digital cash prototype using zero-knowledge proofs to keep everyday payments private while preserving anti-money-laundering controls.
ReportedSupportedSource: Cryptopolitan summary of the BIS report2 sources— create a free account to open themView cited source - [2]
The BIS Innovation Hub developed Project Aurum Phase 2 with the Hong Kong Monetary Authority and other institutions, building on the original Aurum codebase.
ReportedSupportedSource: Cryptopolitan2 sources— create a free account to open themView cited source - [3]
In 2020, BIS general manager Agustín Carstens said on an IMF panel that a CBDC would give the issuer "absolute control on the rules and regulations" governing its use.
ReportedSupportedSource: Cryptopolitan2 sources— create a free account to open themView cited source - [4]
In August 2026, European Central Bank board member Piero Cipollone said the planned digital euro would deliver the maximum level of privacy of any current technology and that the Eurosystem could not structurally link people to their transactions.
ReportedSupportedSource: Cryptopolitan2 sources— create a free account to open themView cited source - [5]
Civil society groups, including the Austrian digital rights organization Epicenter.works, wrote a joint statement warning that legislative promises regarding the digital euro can be reinterpreted or broken.
ReportedSupportedSource: Cryptopolitan2 sources— create a free account to open themView cited source - [6]
In 2023, Brazil's central bank published the source code for its CBDC pilot, and within days people noticed surveillance and control mechanisms in the code that allowed the central bank to freeze or reduce user funds in CBDC wallets.
ReportedSupportedSource: Cointelegraph2 sources— create a free account to open themView cited source - [7]
The BIS wrote that the technology stack is not yet "production ready"; the Phase 2 report was published on a Tuesday.
ReportedSupportedSource: Cointelegraph, citing the BIS report2 sources— create a free account to open themView cited source - [8]
Project Aurum is yet to be released or used commercially.
ReportedSupportedSource: Cryptopolitan2 sources— create a free account to open themView cited source - [9]
The prototype combines encryption, pseudonym-based ownership, BBS+ signatures and zero-knowledge proofs, which let transactions be verified without revealing the payer, payee or amount.
- [10]
Under the design, people would sign up through their regular banks, which verify their identity and keep their records.
- [11]
Personal details will only be provided if the law demands it.
- [12]
BIS found that compromising one bank may expose its customer data but would not expose customer identities from other counterparties; a validator-level compromise alone would not be enough to expose end users.
ReportedSupportedSource: Cointelegraph, citing the BIS Project Aurum Phase 2 reportView cited source - [13]
The BIS report admits stronger privacy can make transactions slower, make programmable features harder to build, and make lost wallets difficult to recover.
- [14]
A research paper by Jeff Nijsse and Andrea Pinto looked at 20 CBDC projects and found that privacy features promised in early proposals usually get watered down by launch.
- [15]
The BIS wrote in its Project Aurum Phase 2 report that digital cash can achieve "cash-like privacy".
- [16]
The prototype takes a balanced approach between complete anonymity and full transaction transparency, BIS said.
- [17]
The central bank would not have access to the identity information and records that banks keep under the design.
Sources
2 independent publishers whose own reporting we read for this story.
- cointelegraph.comDigital cash offers ‘cash-like privacy,’ but bank data breaches threaten users: BIS
1 article · October 13, 2026
- cryptopolitan.comFrom “absolute control” to zero-knowledge proofs: the BIS rewrites its CBDC sales pitch
1 article · October 13, 2026
Topics and entities
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Topics
Entities
- Project AurumFollow
- BIS Innovation HubFollow
- Hong Kong Monetary AuthorityFollow
- European Central BankFollow
- Epicenter.worksFollow
- Bank for International SettlementsFollow