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

The Internet of Money between Anonymity and Publicity: Legal Challenges of Distributed Ledger Technologies in the Crypto Financial Landscape

This research project focuses on the impacts exerted by the tech schemes behind virtual currencies on the EU framework to prevent the misuse of the financial system and it aims to explore legal challenges posed in the IoM landscape by the double-edged nature of DLTs as both transparency and privacy-oriented. On the one hand, it plans to identify effective legislative and regulatory measures to ensure crypto accountability from an AML/CFT standpoint, as well as to assess the relevant role of pseudonymity. On the other hand, it pursues to discover innovative legal approaches to secure AML/CFT active cooperation in the crypto ecosystem(s), to the end of mitigating anonymity and traceability concerns while respecting both the value of publicity and transparency in the law and the conceptual origin of the crypto economy

Self-hosted wallets: the elephant in the crypto room?

While all-time highs of the crypto market continue to grab headlines in the first weeks of 2021, delicate questions remain unanswered as to the application of laws and regulations to cryptoassets. Besides sketching the rationale behind self-hosted cryptocurrency wallets, this blogpost explores the clash between the risks they pose in terms of money laundering and the impacts of possible bans or limitations

Privacy in Cross-border Digital Currency. A Transatlantic Approach

This paper is one of four publications launched at the inaugural Frankfurt Forum on US-European GeoEconomics held in Germany from September 27 – 29, 2022. Co-hosted by the Atlantic Council GeoEconomics Center and Atlantik-Brücke, the Frankfurt Forum anchors critical work on transatlantic economic cooperation. The war in Ukraine, and the G7 response, reminded the world of the impact of transatlantic coordination. As part of the Frankfurt Forum, this new research aims to advance transatlantic dialogue from crisis response to addressing the key economic issues that will underpin the US-EU partnership over the next decade. The goal of the Frankfurt Forum is to deliver a blueprint for cooperation in four key areas: digital currencies, monetary policy, international trade, and economic statecraft

Towards CBDC-based Machine-to-Machine Payments in Consumer IoT

The technological advancement of the Internet of Things (IoT) is a well-known phenomenon that mainly affects industrial sectors but also consumers in everyday life. The use of Consumer IoT, i.e. CIoT, devices is increasing, and they are paving the way for a Machine-to-Machine (M2M) communication that could highly enrich consumer services. In this paper we position ourselves in the narrowing gap between the world of CIoT and the world of money, and we explore the emerging interaction between the payment needs of a M2M Economy and the “new ways of payment”. Indeed, the advent of Distributed Ledger Technology and cryptocurrencies has introduced a tech-oriented dynamism in the monetary and financial sphere. Accordingly, central banks all over the world have started investigations into digital fiat money , i.e., “retail” Central Bank Digital Currencies (CBDCs). Against this backdrop, we analyze the integration of retail CBDC models into M2M and CIoT dynamics, while heeding regulation-by-design and compliance-by/through-design methodologies, and we propose a preliminary model of integration between a two-tier retail CBDC architecture and CIoT

Self-hosted wallets: the elephant in the crypto room?

While all-time highs of the crypto market continue to grab headlines in the first weeks of 2021, delicate questions remain unanswered as to the application of laws and regulations to cryptoassets. Besides sketching the rationale behind self-hosted cryptocurrency wallets, this blogpost explores the clash between the risks they pose in terms of money laundering and the impacts of possible bans or limitations

Crypto-wallets and the new EU AML package: where are the battle lines drawn?

In an effort to overcome the fragmentation stemming from the national transpositions of the existing EU framework to combat money laundering and the financing of terrorism (AML/CFT), the European Commission has recently put forward a comprehensive set of legislative proposals. While accounting for the most significant aspects of this “AML package”, this blogpost explores the endeavor to implement the so-called “crypto travel rule” and the relevant impact on different types of cryptocurrency wallets

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

AML/CFT/CPF endeavors in the crypto space: from blockchain analytics to machine learning

Financial applications of distributed ledger technologies (DLTs) generate regulatory concerns. In the crypto sphere, pseudonymity may safeguard privacy and data protection, but lack of identifiability cripples investigation and enforcement. This challenges the fight against money laundering and the financing of terrorism and proliferation (AML/CFT/CPF). Nonetheless, forensic techniques trace transfers across blockchain ecosystems and provide intelligence to regulated entities. This working paper addresses anomaly detection in the crypto space, the role of machine learning, and the impact of disintermediation

The Internet of Money between Anonymity and Publicity: Legal Challenges of Distributed Ledger Technologies in the Crypto FInancial Landscape

This research project focuses on the impacts exerted by the tech schemes behind virtual currencies on the EU framework to prevent the misuse of the financial system and it aims to explore legal challenges posed in the IoM landscape by the double-edged nature of DLTs as both transparency and privacy-oriented. On the one hand, it plans to identify effective legislative and regulatory measures to ensure crypto account- ability from an AML/CFT standpoint, as well as to assess the relevant role of pseudonymity. On the other hand, it pursues to discover inno- vative legal approaches to secure AML/CFT active cooperation in the crypto ecosystem(s), to the end of mitigating anonymity and traceability concerns while respecting both the value of publicity and transparency in the law and the conceptual origin of the crypto economy.status: Published onlin