ECB Builds a Proof of Concept using Corda to Explore Anonymity in CBDC

But says there is no immediate need to issue CBDC in the euro area.

  • European Central Bank finding the balance between allowing privacy and compliance with regulations
  • The purpose of the research is to be ready should the need arise for a CBDC in the future

European Central Bank (ECB) is now exploring anonymity in central bank digital currencies that would safeguard the privacy of those users who conduct low-value transactions but ensure high-value transfers are subject to anti-money laundering (AML) checks.

The research paper published by the central bank talks about the “major challenge” for the payments ecosystem in the digital economy. This challenge is striking a balance between allowing a degree of privacy and ensuring compliance with regulations.

As such, ECB has established a proof of concept for anonymity in digital cash, which is the central bank digital currency (CBDC). The paper reads:

“The proof of concept drawn up by the ESCB demonstrates that it is possible to construct a simplified CBDC payment system that allows users some degree of privacy for lower-value transactions, while still ensuring that higher-value transactions are subject to mandatory AML/CFT checks.”

The network is developed using Corda by the ESCB’s EUROchain research network, with support from R3 and Accenture using distributed ledger technology.

The proof of concept provides the bank with a digitization solution for AML/CFT compliance procedures where central banks or intermediaries other than that chosen by the user can’t see the user’s identity and transaction history.

The limits on anonymous electronic transactions, imposed via “anonymity vouchers,” are automated and additional checks are further delegated to the AML authority.

This proof of concept, however the bank says is just part of its ongoing research on CBDC. It clarifies that it doesn’t mean that they are proceeding with the CBDC.

“There is no immediate need to take concrete steps towards the issuance of CBDC in the euro area.”

They continue to analyze CBDC with the purpose of exploring new technologies and to be ready should the need arise in the future. Also, the proof of concept will help the bank in the assessment of how a CBDC will work in practice and how the specific technical features will affect its potential implications for an economy.

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AnTy
AnTy
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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