diff --git a/zk-token-sdk/src/sigma_proofs/fee_proof.rs b/zk-token-sdk/src/sigma_proofs/fee_proof.rs
new file mode 100644
index 000000000..c7d18f0ae
--- /dev/null
+++ b/zk-token-sdk/src/sigma_proofs/fee_proof.rs
@@ -0,0 +1,157 @@
+#[cfg(not(target_arch = "bpf"))]
+use {
+    crate::encryption::{
+        elgamal::{ElGamalCiphertext, ElGamalPubkey},
+        pedersen::{PedersenBase, PedersenOpening},
+    },
+    rand::rngs::OsRng,
+};
+use {
+    crate::{errors::ProofError, transcript::TranscriptProtocol},
+    curve25519_dalek::{
+        ristretto::{CompressedRistretto, RistrettoPoint},
+        scalar::Scalar,
+        traits::{IsIdentity, VartimeMultiscalarMul},
+    },
+    merlin::Transcript,
+};
+
+#[allow(non_snake_case)]
+#[derive(Clone)]
+pub struct FeeProof {
+    pub Y_H: CompressedRistretto,
+    pub Y_P: CompressedRistretto,
+    pub z: Scalar,
+}
+
+#[allow(non_snake_case, dead_code)]
+#[cfg(not(target_arch = "bpf"))]
+impl FeeProof {
+    pub fn new(
+        fee_authority_elgamal_pubkey: &ElGamalPubkey,
+        fee_ciphertext: &ElGamalCiphertext,
+        max_fee: u64,
+        opening: &PedersenOpening,
+        transcript: &mut Transcript,
+    ) -> Self {
+        // extract the relevant scalar and Ristretto points from the input
+        let G = PedersenBase::default().G;
+        let H = PedersenBase::default().H;
+        let P = fee_authority_elgamal_pubkey.get_point();
+
+        let m = Scalar::from(max_fee);
+        let C = fee_ciphertext.message_comm.get_point() - m * G;
+        let D = fee_ciphertext.decrypt_handle.get_point();
+        let r = opening.get_scalar();
+
+        // record public values in transcript
+        //
+        // TODO: consider committing to these points outside this method
+        transcript.append_point(b"P", &P.compress());
+        transcript.append_point(b"C", &C.compress());
+        transcript.append_point(b"D", &D.compress());
+
+        // generate a random masking factor that also serve as a nonce
+        let y = Scalar::random(&mut OsRng);
+        let Y_H = (y * H).compress();
+        let Y_P = (y * P).compress();
+
+        // record Y values in transcript and receive a challenge scalar
+        transcript.append_point(b"Y_H", &Y_H);
+        transcript.append_point(b"Y_P", &Y_P);
+        let c = transcript.challenge_scalar(b"c");
+        transcript.challenge_scalar(b"w");
+
+        println!("prover c: {:?}", c);
+
+        // compute the masked encryption randomness
+        let z = c * r + y;
+
+        // TODO: actual fee calculation
+
+        Self { Y_H, Y_P, z }
+    }
+
+    pub fn verify(
+        self,
+        fee_authority_elgamal_pubkey: &ElGamalPubkey,
+        fee_ciphertext: &ElGamalCiphertext,
+        max_fee: u64,
+        transcript: &mut Transcript,
+    ) -> Result<(), ProofError> {
+        // extract the relevant scalar and Ristretto points from the inputs
+        let G = PedersenBase::default().G;
+        let H = PedersenBase::default().H;
+        let P = fee_authority_elgamal_pubkey.get_point();
+
+        let m = Scalar::from(max_fee);
+        let C = fee_ciphertext.message_comm.get_point() - m * G;
+        let D = fee_ciphertext.decrypt_handle.get_point();
+
+        // record public values in transcript
+        transcript.append_point(b"P", &P.compress());
+        transcript.append_point(b"C", &C.compress());
+        transcript.append_point(b"D", &D.compress());
+
+        transcript.validate_and_append_point(b"Y_H", &self.Y_H)?;
+        transcript.validate_and_append_point(b"Y_P", &self.Y_P)?;
+
+        // extract challenge scalars
+        let c = transcript.challenge_scalar(b"c");
+        let w = transcript.challenge_scalar(b"w");
+
+        println!("verifier c: {:?}", c);
+
+        // check that the required algebraic condition holds
+        let Y_H = self.Y_H.decompress().ok_or(ProofError::VerificationError)?;
+        let Y_P = self.Y_P.decompress().ok_or(ProofError::VerificationError)?;
+
+        let check = RistrettoPoint::vartime_multiscalar_mul(
+            vec![self.z, -c, -Scalar::one(), w * self.z, -w * c, -w],
+            vec![H, C, Y_H, P, D, Y_P],
+        );
+
+        if check.is_identity() {
+            Ok(())
+        } else {
+            Err(ProofError::VerificationError)
+        }
+    }
+}
+
+#[cfg(test)]
+mod test {
+    use super::*;
+    use crate::encryption::elgamal::ElGamalKeypair;
+
+    #[test]
+    fn test_fee_proof() {
+        // success case
+        let fee_authority_keypair = ElGamalKeypair::default();
+        let fee_authority_pubkey = fee_authority_keypair.public;
+        let max_fee: u64 = 55;
+
+        let opening = PedersenOpening::random(&mut OsRng);
+        let fee_ciphertext = fee_authority_pubkey.encrypt_with(max_fee, &opening);
+
+        let mut transcript_prover = Transcript::new(b"Test");
+        let mut transcript_verifier = Transcript::new(b"Test");
+
+        let proof = FeeProof::new(
+            &fee_authority_pubkey,
+            &fee_ciphertext,
+            max_fee,
+            &opening,
+            &mut transcript_prover,
+        );
+
+        assert!(proof
+            .verify(
+                &fee_authority_pubkey,
+                &fee_ciphertext,
+                max_fee,
+                &mut transcript_verifier
+            )
+            .is_ok());
+    }
+}
diff --git a/zk-token-sdk/src/sigma_proofs/mod.rs b/zk-token-sdk/src/sigma_proofs/mod.rs
index ad8f5f7eb..bb1abbd98 100644
--- a/zk-token-sdk/src/sigma_proofs/mod.rs
+++ b/zk-token-sdk/src/sigma_proofs/mod.rs
@@ -1,3 +1,4 @@
 pub mod equality_proof;
+pub mod fee_proof;
 pub mod validity_proof;
 pub mod zero_balance_proof;