Provable Compliance without Full Ledger Disclosure

Abstract

Supervisors need reliable assurance over balances, issuance, and transaction integrity. Institutions need toprotect sensitive financial data. Traditional audit practice often resolves this tension by granting broad accessto ledgers. That approach is effective, but costly in privacy, operational risk, and cross-border data exposure.This note presents a settlement architecture in which compliance statements can be proven cryptographicallywithout disclosing the full ledger. A supervised entity can demonstrate that a balance equals a value, exceeds athreshold, or lies within a band. Verifiers check the proof without receiving account-level books. Spending keysremain on the client side and do not travel to the operator to authorize a transfer.A second confidentiality property is reported that is easy to miss in architectural summaries: in a settlementthat updates both accounts in a single transition, the payer must know the recipient’s balance in order toconstruct the proof. Paying someone therefore reveals what they hold. The architecture addresses this with atwo-phase transfer, at a stated cost in finality latency.The paper is deliberately non-utopian. It specifies which properties become demonstrable and which residualtrust remains—especially in a single-node deployment where the operator may still observe state, sequencetransactions, or censor. The institutional claim is modest: zero-knowledge settlement can reduce routine fullledgerdisclosure while improving the quality of evidence for specific supervisory questions.