ECB New Crypto Payment System Proposal addresses AML Risks


The European Central Bank has proposed a new model for dealing with cryptocurrencies, in particular, the associated AML risks. The ECB also makes clear that it is not looking to create its own digital currencies. The new system introduces limited-time “anonymity vouchers” that allow users to spend small amounts anonymously. What is ECB’s new crypto payment system?

27 December, 2019 | AtoZ Markets – The European Central Bank (ECB) has published a new study that proposes a new model to address new money laundering risk associated to cryptos. That aim at balancing the functionality of cryptocurrencies with concerns about anonymity and AML risks. However, the ECB clarified that this work does not mean that the regulator plans to create its own digital currencies.

What is ECB’s New Crypto Payment System?

The proposed new payment system is called EUROchain and is a type of CBDC simplified payment service. Under this new model, all users will be able to preserve their privacy for low-value transactions. Besides, higher-value transactions will remain subject to standard CFT/AML procedures. Users will be able to anonymously transfer a limited amount of centralized digital coins for a specified period, such as $ 2,000 per week.

The central bank and intermediaries will not be able to see the identity and transaction history of the user for low-value transactions. The “ceiling” of this “invisibility” is at the limit of the amount and the duration of the voucher.

Enforcement of all limits is an automated process, while additional checks are entrusted to AML compliance authorities. They can decide to refuse transactions to banned users.

The proposed new system uses the idea of “controllable anonymity” for monetary cryptology operations. However, the system does not seek to gain full control of user information. But to maintain a balance between regulatory frameworks such as anti-money laundering actions and the user’s right to maintain some level of confidentiality.

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ECB’ Crypto Payment System Technology

The ECB system will not be entirely based on the blockchain but will be developed by the Eurosystem’s EUROchain research network. Accenture and R3 will support the development of the project using distributed ledger technology.

For the moment, there is no clarity as to how the new system could take off and operate. However, according to the ECB, the proof-of-concept step would be beneficial for any assessment of the system. And the specific technical characteristics required. The ECB concluded:

“There is no urgent need to take concrete steps towards the issuance of the CBDC in the euro area. But the proof of concept will be decisive in any assessment of

  • How the CBDC could work in practice and 

  • The impact of the specific technical characteristics of such an initiative on its potential implications for the economy.”

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