The Open Legal Challenges of Pursuing AML/CFT Accountability within Privacy-Enhanced IoM Ecosystems

This research paper focuses on the interconnections between traditional and cutting edge technological features of virtual currencies and the EU legal framework to prevent the misuse of the financial system for money laundering and terrorist financing purposes. It highlights a set of Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) challenges brought about in the Internet of Money (IoM) landscape by the double-edged nature of Distributed Ledger Technologies (DLTs) as both transparency and privacy oriented. Special attention is paid to inferences from concepts such as pseudonymity and traceability; this contribution explores these notions by relating them to privacy enhancing mechanisms and blockchain intelligence strategies, while heeding both core elements of the present AML/CFT obliged entities' framework and possible new conceptualizations. Finally, it identifies key controversies and open questions as to the actual feasibility of effectively applying the "active cooperation" AML/CFT approach to the crypto ecosystems

Central Bank Digital Currencies

Today’s societal digitization continues to advance at exponential speeds driven by technology trends. Billions of Internet of Things devices have made their way into our daily lives, but also into healthcare, manufacturing, and supply chains. In contrast, the financial sector still largely operates on legacy infrastructures, where merchants receive their payments long after they released the digital/physical good to the consumer. In addition, the emergence of Decentralized Finance through blockchain technology, and the accumulation of data in private silos, have demonstrated a capacity to impact national sovereignty and monetary transmission channels. Against this backdrop, many central banks have recently started to research and test the issuance of digitally native fiat money – or Central Bank Digital Currencies (CBDCs) – in an effort to redesign the essence and use of physical cash. CBDCs present a broad variety of designs, which translate into manifold techno-legal and standardization policy questions. In this context, this chapter surveys the state-of-the art with specific focus on “retail” CBDCs. In doing so, it provides an overview of candidate architectures, heeds legal impacts and regulatory compliance issues, presents a set of case-studies and touches upon cross-border CBDC challenges