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Privacy Enhancing Technologies: Payments and Financial Services in a Digital Society

January 20, 2023
Payment and Settlement Systems Department
Bank of Japan


In recent years, businesses in Japan and abroad have created many services through the collection of customer data, and the utilization of such data has become an important motivation for business development in the area of payment and settlement, as well as financial services. At the same time, the importance of anti-money laundering and combating the financing of terrorism (AML/CFT) for payments is becoming increasingly recognized, and international discussions are underway. The use of data is becoming more important in order to advance AML/CFT and establish an effective mechanism. Against this backdrop, technologies are being developed to contribute to the protection of users' privacy while using their data for business creation and soundness of transactions.

Specifically, there are the concepts of anonymization, in which data is altered so that individuals cannot be identified, and differential privacy, in which the possibility of identification from analysis results is suppressed by adding noise or by other means. Other methods include secure computation, in which analysis is performed while data is kept secret, and trusted execution environment, in which hardware technology is used to perform computational processing in a secure area where confidentiality is maintained. In addition, federated learning, in which users' information contained in each party's data is kept secret from other parties while collaborating with them to perform machine learning, is also being studied. As a privacy-related concept, self-sovereign identity is also attracting attention.

Discussions on privacy enhancing technologies and their application to payments and financial services may have implications for studies on Central Bank Digital Currency, which have been underway in many countries including Japan.

The Bank of Japan has been steadily proceeding with experiments and explorations into institutional arrangements to ensure the stability and efficiency of the entire payment and settlement system, and to be able to respond appropriately to various changes in the environment in the future. As part of its explorations into the institutional arrangements, the Bank will continue to research and study privacy protection related to digital currencies with a wide range of stakeholders.


This document is an English translation of the Japanese original published on September 29, 2022. Please contact the Payment and Settlement Systems Department in advance to request permission, when reproducing or copying the content of this report for commercial purposes. Please credit the source when reproducing or copying the content of this report.


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