What do you think about central bank digital currency and anti-money laundering?
The Ministry of Commerce mentioned in the “Comprehensive Pilot Plan for Deepening Innovation and Development of Trade in Services” issued on August 14 this year: Digital RMB pilot projects will be launched in Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, and pilot regions where conditions are available. Just a few days ago, the Shenzhen Luohu digital yuan red envelope campaign officially came to an end. Chinese digital currency launched its “first shot” in Shenzhen. In the end, 4,7573 people successfully received the 10 million yuan red envelope rain. This is also the first time that digital yuan has been opened to the public on a large scale
At the beginning of this year, six central banks, including the Bank of Japan, the European Central Bank, and the Bank for International Settlements, set up a fiat digital currency (CBDC) working group; since then, with the COVID-19 pandemic sweeping the world, all countries have accelerated financial system research on digital currencies. By March, the Federal Reserve had signed currency swap agreements with nine central banks, including South Korea, Australia, and Brazil. China's digital currency research is at the forefront of the world, but this time they are all excluded. These situations, which spread the “digital currency Cold War” atmosphere, have all promoted the gradual implementation of China's fiat digital currency (DC/EP).
However, one question I want to discuss in this article is, what impact will the slightly rapid pace of fiat digital currency issuance have on China's anti-money laundering regulations?
Problem introduction
We all know that the official determination of China's private digital currency is generally: it is thought that it can easily breed problems such as capital flight, corruption, and underground economy; price fluctuations are large, making it difficult to perform a value scale function; due to its concealment and anonymity, it is easy to cause crime when used as a limited means of payment or investment. Five ministries and commissions including the Central Bank of China issued the “Notice on Preventing Bitcoin Risk” (hereinafter referred to as the Notice) in 2013, and the “Notice on Preventing the Risk of Token Issuance and Financing” (hereinafter referred to as the Notice), which was jointly issued by relevant departments again in 2017, can be seen.
At the same time, in China's central bank's announcement to implement digital currency (DC/EP), it is believed that such a digital currency is beneficial to meet regulatory requirements such as anti-money laundering and anti-terrorism. Why exactly did the exact opposite result occur is explained as follows.
The obvious differences between the two
The distribution method is different
The central bank's digital currency follows the “central bank - commercial bank” duality framework, and is in fact consistent with the way banknotes are issued and used. Choosing a dual system not only takes into account the problem of avoiding higher DC/EP credit levels than bank deposits, leading to financial disintermediation, but is also an inevitable requirement brought about by large amounts of throughput. And this is different from Bitcoin,EthereumThe decentralized nature of is actually a centralized management model.
Based on this, the design of DC/EP digital wallets can be graded and limited amounts can be arranged. For example, lower-level wallets may be used for daily micropayment needs; accounts that have been authenticated and verified with electronic currency assets can obtain higher quotas and permissions.
Different ways to use
Specifically, the digital currency uses a “one coin, two banks, and three centers” architecture as a method that does not rely on a specific transaction medium or payment channel. “One coin” refers to DC/EP tokens guaranteed by the central bank, “two banks” refer to the central bank's issuing bank and the bank bank bank's bank bank, and “three centers” refer to registration centers, certification centers, and big data analysis centers.
For the “three centers” that guarantee DC/EP distribution and circulation technology, the registration center is responsible for recording the registration of the entire distribution, transfer, and return process; the certification center is responsible for centrally managing the identity of DC/EP users, which is to guarantee the anonymity of transactions; and the big data analysis center actually satisfies regulatory requirements for anti-money laundering and anti-terrorist financing through big data analysis of payment behavior.
This is also a trade-off between anonymous transactions and anti-money laundering regulations. Anti-money laundering, tax evasion, and anti-terrorist financing is carried out through big data. Although ordinary transactions are anonymous, big data can be used to identify some behavioral characteristics, thereby locking down real identities. Specific examples include telecom fraud. The identification characteristic is that a large amount of scattered money is often collected in one account, then suddenly and quickly scattered and disappeared into many accounts. After big data is identified and locked down, it is possible to trace back to the source and find criminals.
Traceable technical advantages
Sister Sa analyzed the relevant case in the previous article. The plaintiff fixed the electronic evidence by fixing a trustworthy timestamp, which in turn confirmed the authenticity of the evidence. In fact, at a time when the Internet is booming, the collection and use of electronic evidence is also receiving more and more attention from the courts.
And the technical advantage of having its own timestamp is an inevitable part of the digital currency system. Every penny comes with detailed transaction information from birth, including transaction time and counterparty, etc. No matter how mixed up, it can be traced back to the roots. Therefore, as the penetration rate of digital currencies increases, the incidence rate of money laundering crimes is bound to decline.
Write at the end
The digital currency represented by Libra aims to create a global stablecoin. It uses bank deposits and short-term treasury bonds as collateral assets, and uses blockchain as the underlying technology. On the one hand, this global stablecoin has a huge advantage in reducing currency issuance costs and cross-border payment costs. On the other hand, it will also have a major impact on the international financial system.
As a result, in 2019, Facebook and 26 global companies published the Libra white paper, which directly challenged the monetary sovereignty of central banks and was boycotted by European and American central banks; after anchoring a single fiat currency (US dollar) in the white paper 2.0 released in April 2020, it suddenly rolled out, further strengthening the hegemonic position of the US dollar.
Faced with this major challenge in the world financial system, it is imperative that China's fiat digital currency be launched on a global scale. Only by actively using emerging technologies such as blockchain, artificial intelligence, and big data to play a role in building society can we stand at the center of this era.
Source: Lawyer Shaw
