The European Central Bank is studying the development of a proof-of-concept (PoC) for the central bank’s digital currency, According to The Finances on Wednesday (December 18). PoC was developed by the European Central Bank’s European Chain Research Network to study the practical application of decentralized technology, according to a report released on Tuesday.
The report outlines that the concept is trying to bridge the gap between the need for private transactions and regulators’ concerns about anti-money laundering compliance.
Its latest research suggests that it is possible to establish a simplified central bank digital money payment system. This system will protect the privacy of users of low-value transactions while ensuring that high-value transfers are subject to anti-money laundering checks.
The ECB is planning to introduce a payment system that has separate requirements for low-value transactions, known as “anonymous coupons”, to bypass central bank oversight. However, large transactions will require mandatory disclosure of identity to meet “anti-money laundering” and “counter-terrorism” requirements.
“The Anti-Money Laundering Agency regularly issues these additional, time-bound statuses to each central bank’s digital currency user,” the report said. Users who wish to transfer central bank digital currencies without disclosing information to anti-money laundering agencies will need to use these vouchers (one for each central bank’s digital currency unit). As a result, the amount of central bank digital currency that can be consumed anonymously is limited by the number of vouchers provided to each user by the anti-money laundering agency. “
The European Central Bank is not the only institution exploring the concept of a central bank’s digital currency, and the central bank has voiced the development of the central bank’s digital currency, aiming to strengthen the internationalisation of the renminbi through a digital version of fiat money.