Use case: Cross-border payments
Utilise blockchains for cross-border payments with Fully Homomorphic Encryption
1. Traditional summary
Transactions are usually made by bank transfers, credit card payments, payment gateways such as Stripe or Paypal or remittance services such as Western Union.
Cross-border payments are notoriously slow, expensive, and opaque, often involving multiple intermediary banks and complex compliance checks.
2. Decentralised summary
In DeFi, cross-border payments are designed to be:
- Faster: transactions settle much quicker than in traditional finance
- Cost-effective: via the removal of bank fees incurred
- Inclusive and accessible: anyone with internet access and a crypto wallet can send and receive payments, bypassing traditional gatekeepers
- Transparent and verifiable: payments are recorded on-chain and can be tracked in real-time
3. Privacy issues
While blockchain technology offers a host of benefits to pique the interest of financial services – near-instantaneous settlement, reduced scope for fraud, 24/7 accessibility and automation of complexity – its transparency is a major hurdle for corporate and institutional use.
Transparency is a hallmark of blockchain-based payments, but can inadvertently expose sensitive information such as wallet addresses, amounts, financial activity particularly by large institutions potentially hurting client relationships or posing a security risk for high value wallet addresses.
Navigating regulatory requirements across different jurisdictions also presents significant challenges. Financial institutions must carefully adhere to Anti-Money Laundering (AML), Know Your Customer (KYC), taxation, and data privacy regulations to maintain legal compliance while processing cross-border transactions.
4. How FHE can help
- Confidential transactions: blinding the information inside the smart contracts keeping the transaction confidential
- Regulatory compliance: payments can be processed across the network, including undergoing automated compliance checks (e.g., verifying the transaction is below a certain AML threshold), all while the data remains encrypted.
The beauty of using FHE in blockchain is selective disclosure of data, programmatically deciding what metadata to expose inside the smart contract depending on the use case. - End-to-end confidentiality: from initiation to settlement, the transaction remains private yet verifiable using other privacy technologies in tandem such as ZK – supporting GDPR, HIPAA, and other regulatory frameworks.
How we can help you bring this use case to life
A global, private payment system built on blockchain must offer high throughput and real-time transaction processing.
LightLocker Node powers the core of such a confidential payment network. It can process a high volume of encrypted transactions and execute instantaneous homomorphic compliance checks (e.g., against AML rules) without creating delays, enabling a payment system that offers both the cryptographic privacy required for corporate finance and the speed of a modern settlement rail.
Commercial benefits
Drive corporate & institutional adoption
Businesses require confidentiality for B2B payments.
An FHE-enabled payment rail allows them to leverage the speed and lower costs of blockchain without exposing sensitive commercial data, unlocking the high-value corporate payments market.
Streamline compliance for reduced costs
Automating compliance checks (like AML thresholds) on encrypted data reduces the need for manual oversight and secures the process.
This lowers operational costs and mitigates the risk of regulatory penalties.
Strong competitive advantage
Financial service providers can offer a superior payment product that is faster than the traditional banking system and more private and secure than standard blockchain transfers. This is a powerful differentiator for attracting and retaining high-value corporate clients.
How does it work?
Tech-friendly description
FHE can be integrated into payment protocols on a blockchain to ensure end-to-end confidentiality. A payment transaction would contain encrypted fields for sender, receiver, and amount. The protocol’s smart contract would then perform necessary logic homomorphically.
Key technical functions include:
– Confidential balance updates: the contract would homomorphically subtract the encrypted amount from the sender’s encrypted balance, and add it to the receiver’s encrypted balance
– Compliance checks: for anti-money laundering (AML)/counter-terrorist financing (CFT) compliance the encrypted transaction amount can be homomorphically compared against an encrypted set of rules.
For example, a circuit can output an encrypted boolean ‘true’ or ‘false’ if the amount is within a permissible limit, without ever revealing the specific value This allows for automated compliance without compromising privacy
– State verification: proofs (potentially ZKPs) can be used alongside FHE to prove that the state transition (the balance update) was performed correctly according to the protocol rules, even though the underlying values are encrypted.
This approach ensures that transaction data remains confidential from all network participants except the sender and receiver, while still allowing for automated, programmable logic and compliance to be enforced by the network.
Exec-friendly description
Cross-border payments are notoriously slow, expensive, and opaque, often involving multiple intermediary banks and complex compliance checks.
While blockchain technology offers a host of benefits to pique the interest of financial services – near-instantaneous settlement, reduced scope for fraud, 24/7 accessibility and automation of complexity – its transparency is a major hurdle for corporate and institutional use.
This transparency would publicly expose sensitive transaction details like payment amounts, sender/receiver identities, and business relationships.
An encrypted blockchain using FHE allows for confidential cross-border payments. A business can initiate a payment where all critical details are encrypted.
The payment can be processed across the network, including undergoing automated compliance checks (e.g., verifying the transaction is below a certain AML threshold), all while the data remains encrypted.
This provides the best of both worlds: the speed, efficiency and always-on reliability of blockchain-based settlement combined with the confidentiality required for secure business transactions.
For global financial services, this enables the creation of more efficient, secure, and compliant payment rails for international trade and finance.
