ECB Explores Anonymous Transactions with Central Bank Digital Currency
- For high-value transactions, the revelation of identity will be necessary.
The European Central Bank is looking into the development of a proof-of-concept (PoC) for a central bank digital currency (CBDC).
Revealed in a report published on Tuesday, the PoC has been developed by the central bank’s EUROchain research network to study the practical application of decentralized technology.
The report outlined that the concept is trying to Bridge Bridge The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat Read this Term the gap between the demand for private transactions and the regulators’ concern with anti-money laundering (AML) compliance.
“The ongoing digitalization of the economy represents a major challenge for the Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term ecosystem, requiring that a balance be struck between allowing a certain degree of privacy in electronic payments and ensuring compliance with regulations aimed at tackling money laundering and the financing of terrorism (AML/CFT regulations),” the report noted.
Our latest research shows that it is possible to build a simplified payment system for central bank digital currencies. Such a system would safeguard users’ privacy for low-value transactions while ensuring that higher-value transfers are subject to anti-money laundering checks.
— European Central Bank (@ecb) December 17, 2019
Bringing anonymity to transactions
The bank is planning to bring a payment system that has separate requirements for low-value transactions, called “anonymity vouchers,” bypassing the surveillance of the central bank. However, large-value transactions will require the mandatory revelation of identity for compliance with AML and counter-terrorism (CFT) requirements.
“In order to enforce AML/CTF limits on the amount that a user can spend without the AML authority seeing transaction data, a novel new concept – “anonymity vouchers” – has been devised,” the report stated.
“The AML authority issues these additional, time-limited states to every CBDC user at regular intervals. If users want to transfer CBDC without revealing information to the AML authority, they need to spend these vouchers (at a ratio of one voucher per CBDC unit transferred). Thus, the amount of CBDC that can be spent anonymously is limited by the number of vouchers that the AML authority provides to each user.”
The ECB is not alone in exploring the concept of CBDC as its counterpart in China is already vocal about such development and is aiming to strengthen the international usage of yuan with a digitized version of the fiat.
The European Central Bank is looking into the development of a proof-of-concept (PoC) for a central bank digital currency (CBDC).
Revealed in a report published on Tuesday, the PoC has been developed by the central bank’s EUROchain research network to study the practical application of decentralized technology.
The report outlined that the concept is trying to Bridge Bridge The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat Read this Term the gap between the demand for private transactions and the regulators’ concern with anti-money laundering (AML) compliance.
“The ongoing digitalization of the economy represents a major challenge for the Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term ecosystem, requiring that a balance be struck between allowing a certain degree of privacy in electronic payments and ensuring compliance with regulations aimed at tackling money laundering and the financing of terrorism (AML/CFT regulations),” the report noted.
Our latest research shows that it is possible to build a simplified payment system for central bank digital currencies. Such a system would safeguard users’ privacy for low-value transactions while ensuring that higher-value transfers are subject to anti-money laundering checks.
— European Central Bank (@ecb) December 17, 2019
Bringing anonymity to transactions
The bank is planning to bring a payment system that has separate requirements for low-value transactions, called “anonymity vouchers,” bypassing the surveillance of the central bank. However, large-value transactions will require the mandatory revelation of identity for compliance with AML and counter-terrorism (CFT) requirements.
“In order to enforce AML/CTF limits on the amount that a user can spend without the AML authority seeing transaction data, a novel new concept – “anonymity vouchers” – has been devised,” the report stated.
“The AML authority issues these additional, time-limited states to every CBDC user at regular intervals. If users want to transfer CBDC without revealing information to the AML authority, they need to spend these vouchers (at a ratio of one voucher per CBDC unit transferred). Thus, the amount of CBDC that can be spent anonymously is limited by the number of vouchers that the AML authority provides to each user.”
The ECB is not alone in exploring the concept of CBDC as its counterpart in China is already vocal about such development and is aiming to strengthen the international usage of yuan with a digitized version of the fiat.