ECB’s CBDC Adopts Pseudo-Anonymity of Bitcoin
Nowadays, there are teams appointed by central banks to research and develop distributed ledger technology (DLT). Numerous central banks such as the ones in the U.S., China, and the Europe have expressed remarkable interest in blockchain.
On December 17, the ECB released a fresh report entitled “Exploring anonymity in central bank digital currencies.” The report provides detailed information about the way a central bank digital currency (CBDC) could function. The CBDC research is one of a proof-of-concept with the objective of contributing to the wider discussion of central bank chains.
The concept utilizes many features established by R3 and Accenture and the network is known as “Eurochain.” The content of the Eurochain report includes the merits of the hypothetical network as well as the discussion on the way anonymity can fit into the logistics.
The report stated the intending approach of the ECB in enforcing AML/CTF limits on the amount that a CBDC user can spend without involving the authority the AML. The report maintained the following:
“The ongoing digitalisation of the economy represents a major challenge for the payments 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).”
Following the release of the report, people within the crypto space discussed the subject. A tweet by a critic stated that the Eurochain CBDC is based on UTXO model of Bitcoin. John-Paul commented on Twitter as follow:
1/ The ECB is the central issuer of the "CBDC" units. The units live on the EUROChain, which believe it or not, follows the Bitcoin UTXO model.
Already it is apparent the chain cannot have "anonymity" as they call it, at best it can only match Bitcoin's pseudo-anonymity
— JP (@jpthor__) December 17, 2019
He continued that it is not possible for users to generate their wallets but need to apply to ‘intermediaries’ for a fresh account. Likewise, he said that Eurochain can control wallet access and CBDC volume.
Right from 2015 there has been discussions, release of papers, and the creation of CBDCs. The pioneer CBDC known as the petro (PTR) was developed by Venezuela’s president, while more CBDCs have been rumored to be on the way. Nevertheless, some countries are not interested in the CBDC trend and are warning against them. According to the central bank of South Korea, countries that adopt a CBDC could experience liquidity shortages and bring about increase in interest rates. Following a report by the Bank of Korea, another study maintained that approximately 70 percent of the central banks worldwide are researching CBDCs.
Featured image courtesy of Shutterstock. Source: CryptoPress.