ECB Proposes New Crypto Payment System with ‘Controllable Anonymity’
- The new system introduces limited-time “anonymity vouchers,” which allow users to anonymously spend small amounts.
European Central Bank (ECB) has published a new study that proposes a new model to balance the functionality of Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw with concerns about anonymity and AML risks. The ECB, however, clarified that this work doesn’t mean the regulator is looking at creating its own digital currencies.
The new model introduces a different proof of concept that creates a simplified CBDC payment system, called EUROchain. Under the model, users can maintain privacy for lower-value transactions, while their higher-value transactions will remain subject to regular AML/CFT checks. This could be achieved through “anonymity vouchers,” which allow users to anonymously transfer a limited amount of the central-backed coin over a defined period of time, for example, $1000 per week.
For such low-value transactions, the user’s identity and transaction history can’t be seen by the central bank or intermediaries, up to the limit of the vouchers’ time and amount. The enforcement of limits on anonymous electronic transactions is automated, and additional checks are delegated to AML/CFT compliance authority, which also could reject transactions to banned users.
Tackling anonymity and AML compliance
As such, the proposed system is not seeking full control of information on its users, rather using controllable anonymity in digital currency transactions. At the same time, it will keep the balance to allow for regulatory demands like anti-money-laundering actions and combating the financing of terrorism.
The ECB said the digital currency would not rely on a pure Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe architecture. Instead, the features of the proposed system were developed by the Eurosystem's EUROchain research network, with the support of Accenture and R3, using distributed ledger technology.
While there is little consensus on how such a system might take off, the European Union was reportedly mulling issuing a proprietary cryptocurrency. Europe isn’t the only region exploring a digital currency as the idea emerged strongly in many countries that were worried that Facebook’s Libra cryptocurrency could erode their control over money.
“Although there is no immediate need to take concrete steps towards the issuance of CBDC in the euro area, the proof of concept will be instrumental in any assessment of (i) how CBDC could work in practice and (ii) how the specific technical features of such an initiative will affect its potential implications for the economy,” the ECB concluded.
European Central Bank (ECB) has published a new study that proposes a new model to balance the functionality of Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw with concerns about anonymity and AML risks. The ECB, however, clarified that this work doesn’t mean the regulator is looking at creating its own digital currencies.
The new model introduces a different proof of concept that creates a simplified CBDC payment system, called EUROchain. Under the model, users can maintain privacy for lower-value transactions, while their higher-value transactions will remain subject to regular AML/CFT checks. This could be achieved through “anonymity vouchers,” which allow users to anonymously transfer a limited amount of the central-backed coin over a defined period of time, for example, $1000 per week.
For such low-value transactions, the user’s identity and transaction history can’t be seen by the central bank or intermediaries, up to the limit of the vouchers’ time and amount. The enforcement of limits on anonymous electronic transactions is automated, and additional checks are delegated to AML/CFT compliance authority, which also could reject transactions to banned users.
Tackling anonymity and AML compliance
As such, the proposed system is not seeking full control of information on its users, rather using controllable anonymity in digital currency transactions. At the same time, it will keep the balance to allow for regulatory demands like anti-money-laundering actions and combating the financing of terrorism.
The ECB said the digital currency would not rely on a pure Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe architecture. Instead, the features of the proposed system were developed by the Eurosystem's EUROchain research network, with the support of Accenture and R3, using distributed ledger technology.
While there is little consensus on how such a system might take off, the European Union was reportedly mulling issuing a proprietary cryptocurrency. Europe isn’t the only region exploring a digital currency as the idea emerged strongly in many countries that were worried that Facebook’s Libra cryptocurrency could erode their control over money.
“Although there is no immediate need to take concrete steps towards the issuance of CBDC in the euro area, the proof of concept will be instrumental in any assessment of (i) how CBDC could work in practice and (ii) how the specific technical features of such an initiative will affect its potential implications for the economy,” the ECB concluded.