'Anonymity Vouchers' Could Bring Limited Privacy to CBDCs: ECB Report

Europe's central bankers have developed an "anonymity voucher" to give prospective CBDC users limited privacy in their retail transactions.

AccessTimeIconDec 17, 2019 at 5:45 p.m. UTC
Updated Sep 13, 2021 at 11:50 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The European Central Bank (ECB) is thinking through the logistics of a hypothetical central bank digital currency (CBDC).

Revealed Tuesday in an ECB report, Europe's central bankers have developed an “anonymity voucher” to give prospective CBDC users limited privacy in their retail transactions.

The ECB’s “novel new concept” aims to bridge two clashing forces in the digitized payments landscape: Europeans’ desire for private transactions and regulators’ demand for anti-money-laundering (AML) enforcement.

“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),” the report’s executive summary said.

The anonymity vouchers, issued to all account holders at a “regular interval” regardless of their account balances, could be redeemed on a one-to-one basis to shield their transactions, the report states.

Under the proposed system, if Alice wants to anonymously send CBDC tokens to Bob, Alice must hold the equivalent number of anonymity vouchers. The anonymized transactions would skip reviews from the ECB’s proposed AML Authority, the intermediary reviewing all transactions.

Image via ECB
Image via ECB

However, if Alice does not have enough vouchers she cannot send an anonymous transaction. The ECB said vouchers cannot be transferred between individuals, are “time-limited” and are released in limited batches by the AML Authority.

Anonymous vouchers, the report states, “are simply a technical tool used to limit the amount of CBDC that can be transferred anonymously. This means that limits on anonymous CBDC transfers can be enforced without recording the amount of CBDC that a user has spent, thereby protecting users’ privacy.”

In a tweet, the ECB hailed its research as evidence that privacy concerns and regulatory demands can coexist in a CBDC:

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.