Central Bank Digital Currency: A Focus on Anonymity

Blockchain has been uppermost in the news almost uninterruptedly since it entered the mainstream with the appearance of several different crypto-assets (This term includes cryptocurrencies, virtual assets, virtual currencies, digital assets, digital currencies, and similar definitions used worldwide, and encompasses “tokens” used or classified as payment tokens, security tokens, utility tokens, and stablecoins, among others.) and its availability to the general public. The interest of the authorities (in particular during the last half of 2022) has been growing exponentially and is leading to a renewed focus on what was, until now, known as the Crypto “Wild West” ( https://www.wsj.com/articles/sec-will-police-cryptocurrencies-to-maximum-possible-extent-chair-gary-gensler-says-11628007567 .) Further to the legal and regulatory considerations arising from the crypto ecosystem, authorities have also been looking into the possibilities that can be harnessed from its underlying technologies and concepts, and testing solutions such as those related to land registry, social-benefits management, patent protection and digital currencies issued by central banks (Central Bank Digital Currencies or CBDCs). To be noted, however, is that all those activities, although they could use blockchain or DLT-based solutions, do not necessarily need to. This includes CBDC, which can be issued and managed through blockchain-type solutions, traditional methods, or a combination thereof. In this chapter we consider the topic of CBDC, what it is and its implications with a particular emphasis on anonymity—an aspect that we believe will be of the utmost importance within the implementation of CBDC by central banks around the world, in particular when, and if, central banks from major and advanced economies move forward with CBDC solutions.