What do you think of the central bank’s digital currency and anti-money laundering?


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The Ministry of Commerce mentioned in the “Comprehensive Deepening of the Pilot Program for the Innovation and Development of Trade in Services” issued on August 14 this year: Pilot digital renminbi trials will be carried out in the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area and the pilot regions in the central and western regions where conditions permit . Just a few days ago, the Shenzhen Luohu Digital RMB red envelope event officially ended. The Chinese digital currency fired the “first shot” in Shenzhen. The 10 million red envelope rain was finally successfully received by 47573 people. This is also the first large-scale opening of digital RMB to the public.

At the beginning of this year, the Bank of Japan, the European Central Bank, the Bank of England and other six central banks and the Bank for International Settlements established a legal digital currency (CBDC) working group; afterwards, as the new crown epidemic swept the world by storm, all countries accelerated their efforts in digital currencies. For financial system research, in March, the Federal Reserve signed currency swap agreements with the central banks of nine countries including South Korea, Australia, and Brazil. my country’s digital currency research was originally at the forefront of the world, but this time it has been excluded. These situations permeating the “digital currency cold war” atmosphere have promoted the gradual landing of my country’s legal digital currency (DC/EP).

One question that this article wants to discuss is, what impact will the faster-paced issuance of legal digital currency have on my country’s anti-money laundering supervision?

Problem introduction

We all know that the official recognition of my country’s private digital currency is generally: it is believed that it is easy to breed capital flight, corruption, underground economy and other problems; price fluctuations are large, and it is difficult to perform value scale functions; due to its concealment and anonymity, When used as a limited payment tool or investment target, it is easy to cause crime. In 2013, the Central Bank of my country and other five ministries issued the “Notice on Preventing Bitcoin Risks” (hereinafter referred to as the Notice), and in 2017, the relevant departments jointly issued the “Announcement on Preventing Token Issuance Financing Risks” (hereinafter referred to as the Announcement), It can be seen.

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At the same time, in the promotion of digital currency (DC/EP) by my country’s central bank, it is believed that such a digital currency is beneficial to meet the regulatory needs of anti-money laundering and anti-terrorism. Why is there such a completely opposite result? The interpretation is as follows.

The obvious difference between the two

Issuance method is different

The central bank’s digital currency follows the dual framework of “central bank-commercial bank”, which is actually consistent with the issuance and use of banknotes. Choosing a two-element system not only takes into account the problem of avoiding the DC/EP credit level higher than bank deposits, leading to financial disintermediation, it is also an inevitable requirement brought by large throughput. This is different from the decentralized characteristics of Bitcoin and Ethereum, and it is actually a centralized management model.

On this basis, the design of the DC/EP digital wallet can be classified and restricted. For example, a low-level wallet may be used for daily micropayment needs; while an account that has passed identity authentication and electronic currency asset verification can obtain a higher amount and authority.

Different ways of use

Specifically, the architecture of “one coin, two banks, and three centers” used by digital currency is a way that does not rely on specific transaction media and payment channels. “One coin” refers to the DC/EP token issued under the guarantee of the central bank, “two treasury” refers to the central bank’s issuance treasury and commercial bank treasury, and “three centers” refer to the registration center, authentication center and big data analysis center.

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Regarding the “three centers” as the guarantee of DC/EP issuance and circulation technology, the registration center is responsible for recording the registration of the entire process of issuance, transfer and return; the certification center is responsible for centralized management of DC/EP user identities, which is to ensure the anonymity of transactions The big data analysis center through the big data analysis of payment behavior is actually to meet the regulatory needs of anti-money laundering and anti-terrorist financing.

This is also a trade-off in the supervision of transaction anonymity and anti-money laundering. Anti-money laundering, anti-tax evasion, and anti-terrorist financing are carried out through big data. Although ordinary transactions are anonymous, some behavioral characteristics can be identified with big data to lock the true identity. A specific example is telecommunications fraud. The identification feature is often that a large amount of scattered money is concentrated in one account, and then suddenly and quickly dispersed, disappearing in many accounts. After big data is identified and locked, the root can be traced to find the criminals.

Traceable technical advantages

Sister Sa has analyzed relevant cases in the previous article, and the plaintiff fixed the electronic evidence by fixing credible timestamps, thereby confirming the authenticity of the evidence. In fact, at the time when the Internet is booming, the collection and use of electronic evidence has received increasing attention from the courts.

The technical advantage of self-time stamping is a necessity of the digital currency system. Every penny comes with detailed transaction information from the time of birth, including transaction time and counterparty, etc., no matter what the confusion, you can follow the vine and trace the source. Therefore, as the penetration rate of digital currencies increases, the incidence of money laundering crimes will inevitably decrease.

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Write at the end

The digital currency represented by Libra aims to create a global stable currency. It uses bank deposits and short-term government bonds as collateral assets, while using blockchain as the underlying technology. On the one hand, this global stable currency has huge advantages in reducing currency issuance costs and reducing cross-border payment costs. On the other hand, it will also have a greater impact on the international financial system.

Therefore, in 2019, Facebook and 26 companies around the world released the Libra white paper, which directly challenged the monetary sovereignty of central banks of various countries, and was resisted by central banks in Europe and the United States. However, after anchoring a single legal currency (US dollar) in the White Paper 2.0 released in April 2020, It spread out all at once, and further strengthened the hegemony of the dollar.

Faced with this major challenge of the world financial system, it is imperative for my country to launch a legal digital currency on a global scale. Actively use blockchain, artificial intelligence, big data and other emerging technologies to play a role in building society. The center stage of the times.