Group of central banks says full anonymity for CBDCs is unacceptable

Authors report BIS and seven central banks argue that central bank digital currencies (CBDCs) should not imply full anonymity due to AML/CFT rules. In the expert community, there are those who strongly disagree, The Block.

“Full anonymity is unlikely. For a CBDC-based payment system, the key questions will be: who can access the data, to what extent, and under what circumstances,” the document notes.

The CBDC concept authors argue that close coordination with national authorities (for example, the tax service) will be required to strike a balance between public privacy and reducing illicit activity.

“Nonsense. There is no basis for such statements,” replied Rohan Grey, vice-chair of the Privacy Working Group of the Digital Currency Initiative at Stanford University.

The expert argues that technically it is incorrect to reject the possibility of providing CBDCs with a level of anonymity akin to cash. He proposed creating a new legal category for digital currencies. Grey added that CBDCs do not necessarily have to be considered alongside other forms of digital payments.

Jerry Brito, director of Coin Center, a legal nonprofit focused on the crypto industry, also expressed disagreement with the BIS’s stance on CBDC anonymity.

“Authors default to assuming that central banks have some obligation to comply with AML/CFT requirements. They are merely issuers of anonymous banknotes and coins,” Brito wrote in the blog.

The publication notes that, according to the recently released Sand Dollar white paper, the Bahamas’ national digital currency does not envisage anonymity.

Experts polled also doubt that this characteristic will be reflected in the digital yuan.

Grey says there is semantic confusion. He argues that when the term “anonymous” is used, China implies “controlled anonymity.” Specifically, counterparties may remain anonymous to each other while the government maintains oversight. In this case, the actual name is identified on an internal server and confidential transactions occur on the external one.

Brito agrees with his colleague, stating that the notion of “full anonymity” is meaningless.

“Anonymity is binary, either it exists or it does not. Either centralized data on balances and transactions exists, or it does not; either they are anonymous or not. I know of no middle ground. There is no full or partial anonymity,” emphasised Brito.

Earlier, ForkLog examined the Bank of Russia’s report on the digital ruble, which presents an ambivalent stance on data privacy.

Accessibility and traceability: how the Bank of Russia sees the digital ruble

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