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pattern-private-iso20022.md

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title Pattern: Private ISO 20022 Messaging & Settlement
status draft
maturity research
works-best-when
Institutions already exchange ISO 20022 messages (pacs.008/009/002, camt.\*).
On-chain settlement (ERC-20, tokenized deposits) must link to SWIFT/ISO workflows.
Regulators require selective audit, not full transparency.
avoid-when
Institutions are not ISO-native (retail/DeFi-native apps).
Privacy is not a requirement (public stablecoins acceptable).
dependencies
ISO 20022 schema (pacs.008/009/002, camt.\*)
ERC-20 / ERC-3643 (tokenized cash/RWA)
Optional
ERC-7573 (conditional settlement), ZK proof system

Intent

Coordinate private ERC-20 settlements between banks using ISO 20022 as the instruction layer.
ISO messages are linked to the cash leg, while the cash leg itself settles privately via a shielded mechanism (privacy L2 / shielded pool / confidential token) with regulator-only visibility.

Ingredients

  • Standards:
  • Infra
    • Privacy settlement rail: shielded pool (e.g., Aztec/Railgun/Penumbra) or confidential token (e.g., fhEVM-style)
    • Rollup/validium for anchoring minimal metadata (msg type, status, coarse time bucket)
  • Off-chain
    • ISO parsing/normalization (XML → canonical JSON)
    • KMS for bank/regulator keys; selective-disclosure service

Protocol (private cash-leg variants)

A1. Shielded Pool Settlement

  1. Anchor minimal ISO metadata (e.g., msgType, timeBucket) and a message commitment C_msg on-chain.
  2. Wrap/mint the ERC-20 into a shielded pool and hold balances as notes.
  3. Execute a shielded transfer from Bank A’s note to Bank B’s note, binding the transfer to C_msg (e.g., include C_msg in the spend circuit).
  4. Regulator holds view keys for scoped audits (amounts/parties/routes if needed).

A2. Confidential Token Settlement (permissioned L2)

  1. Anchor minimal ISO metadata + C_msg.
  2. Use a confidential ERC-20 where balances and amounts are encrypted.
  3. Settlement controller authorizes a confidential transfer (encrypted state update) referencing C_msg.
  4. Regulator can view via scoped keys or field-level selective reveal.

A3. Single-Domain Private Settle (roll-in, settle, roll-out)

  1. Temporarily bridge both legs to a common privacy L2 (e.g.; Aztec).
  2. Perform a single-tx shielded DvP/PvP referencing C_msg.
  3. Bridge assets back to their origin chains as needed.

Guarantees

  • Privacy: cash-leg amounts and counterparties are hidden on-chain (B1/B2/B3).
  • Integrity & linkage: settlement references C_msg so the cash leg is cryptographically linked to the ISO instruction.
  • Auditability: regulator can decrypt selected fields or use view keys to audit shielded transfers.
  • Interoperability: ISO schema provides consistent mapping across banks/corridors.

Trade-offs

  • Privacy rails (B1/B2) introduce infra complexity (shielded circuits or confidential VM) and key governance.
  • Signing convention (algorithm, PKI) must be agreed (full ISO hash vs reduced settlement tuple) for on-chain authorization.
  • Cross-chain atomicity (if the two legs span different chains) requires zk-SPV or single-domain execution (B3).

Example

  • Bank A issues pacs.008 “pay 10m EURC from DEUTDEFFXXX → BNPAFRPPXXX”.
  • Off-chain: compute C_msg from the canonical ISO message.
  • B1: Wrap EURC into a shielded pool, execute a note-to-note transfer bound to C_msg.
    or B2: Call confidential-token transfer (encrypted state), referencing C_msg.
    or B3: Bridge to a shared privacy L2, do one-tx shielded DvP, bridge out.
  • Regulator later audits via view keys / selective disclosure.

See also

  • pattern-aztec-privacy-l2-erc7573.md / pattern-confidential-erc20-fhe-l2-erc7573.md (privacy rails)
  • pattern-dvp-erc7573.md (conditional coupling)
  • pattern-zk-spv.md (strong cross-chain atomicity)