Central Bank Digital Currencies and financial integrity: finding a new trade-off between privacy and traceability within a changing financial architecture

Soana, Giulio; de A uda, Thomaz
A icle — Published Ve sion
Cen al Bank Digi al Cu encies and inancial in eg i y: inding a new
ade-o be ween p i acy and aceabili y wi hin a changing inancial
a chi ec u e
Jou nal o Banking Regula ion
P o ided in Coope a ion wi h:
Sp inge Na u e
Sugges ed Ci a ion: Soana, Giulio; de A uda, Thomaz (2024) : Cen al Bank Digi al Cu encies and
inancial in eg i y: inding a new ade-o be ween p i acy and aceabili y wi hin a changing
inancial a chi ec u e, Jou nal o Banking Regula ion, ISSN 1750-2071, Palg a e Macmillan, London,
Vol. 25, Iss. 4, pp. 467-486,
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ORIGINAL ARTICLE
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew
ade‑o be weenp i acy and aceabili y wi hinachanging inancial
a chi ec u e
GiulioSoana1,2 · ThomazdeA uda2,3
Accep ed: 21 Feb ua y 2024 / Published online: 20 Ma ch 2024
© The Au ho (s) 2024
Abs ac
In an inc easingly digi ised wo ld, and wi hin he new eali y o digi al inance, a ully digi ised public cu ency seems o be
a na u al s ep. To his end, cen al banks ha e been es ing he possibili y o issue a digi al o m o he adi ional ia cu -
ency (so-called Cen al Bank Digi al Cu ency-CBDC). As hese p ojec s s eadily p og ess, and in some cases, each he
implemen a ion phase, a my iad o ques ions, om legal o mac oeconomic, a ise. This pape aims o ocus, in pa icula ,
on wo complemen a y and co- ela ed aspec s in ol ing CBCDs: (i) how can he ull digi alisa ion and cen alisa ion o he
ansac ion ledge be combined wi h p i acy and (ii) o wha ex en CBDCs a ec he alloca ion o bu den and he espon-
sibili y o e supe ision o e ail ansac ions. Eminen ly, he use o cash ensu es a o m o de aul p i acy ha p o ec s he
indi idual agains S a e and p i a e in usion. While his p i acy has caused conce n, due o i s c iminogenic po en ial, and
has been consequen ly limi ed by an i-money launde ing (AML) egula ions, he emaining cone o shadow cash gua an ees
is a c ucial limi o con ol. In he con ex o a shi ing inancial sys em, unde going deep ans o ma ion due o inc easing
da a ica ion and decen alisa ion o he ma ke , a new go e nance o inancial supe ision and eco d-keeping—up o now
based on a unique and cen alised ledge —is c ucial o ede ine he ade-o be ween inancial in eg i y and p i acy. This
a icle will examine he o igins and cha ac e is ics o CBDCs, o hen analyse how he ade-o be ween con ol and p i acy
is se o eshape his new a chi ec u e.
* Giulio Soana
[email p o ec ed]
1 KU Leu en/LUISS, Rome, I aly
2 EBI Young Resea che s G oup, F ank u , Ge many
3 Bocconi Uni e si y, Milan, I aly
468 G.Soana, T.de A uda
CBDC: anin oduc ion
O e he las ew yea s, au ho i ies and academics ha e been
analysing he economic and inancial e ec s s emming om
he po en ial implemen a ion o Cen al Bank Digi al Cu -
encies (CBDCs)1 by na ional go e nmen s.2 To ha ex en ,
e en hough much a en ion has been b ough o wa d in
e ms o mac oeconomic consequences o such unde aking,
esea ch has been sca ce in he ield o inancial in eg i y.
Indeed, as di e en CBDC designs s a aking shape, each
o hem bea s di ec implica ions o he egula o y ea men
o unde lying an i-money launde ing, comba ing he inanc-
ing o e o ism (AML/CFT) and p i acy conside a ions.
This s udy will ocus on he CBDC cu en ly de eloping
wi hin he Eu opean Union (EU), whe e also he egula-
o y egimes go e ning digi al p i acy and digi al inance in
gene al—especially wi h he adop ion o he MiCA,3 Pilo
Regime4 and DORA5 egula ions—lead o a highly in ica e
legal scheme, aiming o sa egua d dis inc (and, in some
cases, con lic ing) in e es s, which need o coexis wi h
equally complex AML/CFT amewo ks, including unde
he auspice o a new cen alised Eu opean supe iso o
AML/CFT ( he so-called An i-Money Launde ing Au ho -
i y, AMLA).6
The pu pose o his pape is no o p o ide a guideline on
he inancial in eg i y s anda ds ha should be ailo ed o
CBDCs a chi ec u es, bu a he o analyse wha he model
unde discussion in he EU may en ail o s akeholde s and
socie y. Mo e impo an ly, depending on he way hey a e
ul ima ely s uc u ed, he ad en o CBDCs in Eu ope may
adically change he alloca ion o bu den and he espon-
sibili y o e he supe ision o e ail ansac ions, om an
AML/CFT s andpoin . This implies ecalib a ing he adi-
ional oles played by he Eu opean Cen al Bank (ECB),
Eu opean Supe iso y Au ho i ies (ESAs), na ional compe-
en au ho i ies (NCAs), inancial in elligence uni s (FIUs)
and inancial in e media ies on secu ing inancial in eg i y,
in a shi om he pa adigm ha has ma ked inancial in eg-
i y egula ion since i s c ea ion.
Challenges posed bydecen alised inance
Unde s anding how inancial supe ision should adap o
he CBDC phenomenon should no p escind om a p e i-
ous analysis on how he pilla s ha suppo he inancial
sys em ha e been changing, and in accoun o which la ge
se o ac o s. Indeed, we may a gue ha CBDCs a e me ely
a e lec ion o ce ain pa e ns o echnological e olu ion
ha ha e been dis up ing he dynamics o he inancial
sys em and inse ing new elemen s in o i s playing ield.
As da a become inc easingly impo an and lead he global
economy o wha some call he ou h indus ial e olu-
ion,7 he inancial sec o i sel is s uggling o deal wi h
a new kind o economy, based p ima ily on da a ica ion8
and decen alisa ion.9 Acco dingly, da a ica ion e e s o he
p ocess o a ibu ing economic alue o da a, leading o he
possibili y o gene a ing esou ces by ansac ing on da a.
Mo eo e , i ela es o bo h Moo e’s and K yde ’s laws,10
which espec i ely sus ain he assump ions ha he amoun
o da a p ocessing powe and da a s o age capaci y g ows
exponen ially, leading o e e -lowe cos s o bo h. As p o-
duc ion cos s o ne wo k componen s gain mo e e iciency,
ha dwa e becomes inc easingly i ualised, hus leading
1 IMF S a de ined CBDC as “a new o m o money issued digi-
ally by he cen al bank and in ended o se e as legal ende ”. See
IMF S a , “Cas ing Ligh on Cen al Bank Digi al Cu ency, IMF”,
SDN/18/08.
2 To da e, he mos ad anced e ail CBDC p ojec s in place a e
he DCash in Eas e n Ca ibbean and he Sand Dolla in he Baha-
mas, asides om he Chinese E-Yuan. Howe e , se e al p ojec s a e
al eady in an ad anced phase, such as he Bakong P ojec (Cambo-
dia), DC/EP (China), E-h y nia (Uk aine), E-peso (U uguay), Din-
e o Elec ónico (Ecuado ), E-K ona (Sweden), E-won (Ko ea) and
he Digi al Li a (Tu key). Fo wholesale CBDCs, ma u e ini ia i es
include he In hanon-LionRock p ojec (Hong Kong SAR and Thai-
land), Ubin (Singapo e), Jaspe (Canada), TBC (UK and No he n
I eland), Ju a (F ance and Swi ze land), Khokha (Sou h A ica),
S ella (EU and Japan), Abe (Uni ed A ab Emi a es). Many o he
ju isdic ions and p i a e playe s a e also sponso ing signi ican ini ia-
i es in he ield.
3 P oposal o a Regula ion o he Eu opean Pa liamen and o he
Council on Ma ke s in C yp o-asse s, and amending Di ec i e (EU)
2019/1937 (COM/2020/593 inal).
4 Regula ion (EU) 2022/858 o he Eu opean Pa liamen and o he
Council o 30May 2022 on a pilo egime o ma ke in as uc u es
based on dis ibu ed ledge echnology, and amending Regula ions
(EU) No600/2014 and (EU) No909/2014 and Di ec i e 2014/65/EU.
5 Regula ion (EU) 2022/2554 o he Eu opean Pa liamen and o he
Council o 14 Decembe 2022 on digi al ope a ional esilience o
he inancial sec o and amending Regula ions (EC) No 1060/2009,
(EU) No 648/2012, (EU) No 600/2014, (EU) No 909/2014 and (EU)
2016/1011.
6 P oposal o a Regula ion o he Eu opean Pa liamen and o he
Council es ablishing he Au ho i y o An i-Money Launde ing and
Coun e ing he Financing o Te o ism and amending Regula ions
(EU) No 1093/2010, (EU) 1094/2010, (EU) 1095/2010.
7 R. Mo a —H. A man—S. Mousa, “The ou h indus ial e olu-
ion (Indus y 4.0): A social inno a ion pe spec i e”, Technology
Inno a ion Managemen Re iew, Vol. 7(11), 12-20, 2017.
8 See, among o he s, M. Zacha iadis -P. Ozcan, “The API Economy
and Digi al T ans o ma ion in Financial Se ices: The case o Open
Banking”. SWIFT Ins i u e Wo king Pape 2016-001, 2017.
9 See F. Schä , “Decen alized Finance: On Blockchain- and Sma
Con ac -based Financial Ma ke s”, Fede al Rese e Bank o S .
Louis, Vol. 103(2), 153-174, 2021. See also D. Ze zsche -W. A ne —
R. Buckley—“Decen alized Finance”, Uni e si y o Hong Kong Fac-
ul y o Law Resea ch Pape No. 2020/010, 2020.
10 See G. Moo e GE, “P og ess in digi al in eg a ed elec onics”,
P oceedings o he IEEE elec on de ices mee ing, Vol 21, 1975,
21–25; C. Wal e , “K yde 's law”, Scien i ic Ame ican, 293 2005,
32-3.
469
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew ade‑o be weenp i acy…
o a decen alisa ion o se e s and hos s ha un so wa e
on a non-local basis and a ou a chi ec u es which a e
se ice-o ien ed.11
Da a ica ion and decen alisa ion o m he co e o wha
may be e e ed o as decen alised inance (DeFi),12 which
comp ises a numbe o echnologies spanning om a i icial
in elligence (AI), dis ibu ed ledge s, cloud se ices and big
da a. These, in u n, lead o c yp o-asse s and he mul i ude
o se ices and p oduc s ha inhabi he cons an ly e ol ing
en i onmen o FinTech and c yp o-asse s. D i en by such
apid echnological de elopmen s, inancial se ices ha e
been sub e ing adi ional banking models wi h dis up i e
app oaches o inance.
A he hea o he concep o DeFi lies a wide se o
challenges ha a e ye o be add essed by playe s, con-
sume s and egula o s. The e ain is a om yielding i s
ull po en ial and he ma ke is s ill likely o expe ience
majo shi s and accommoda ions be o e ma u ing in o a
mo e s able scena io. In his sense, DeFi sheds ligh upon
issues now aced by he inancial sys em, such as he ole
o in e media ies, us and con idence on echnology in a-
s uc u es, da a p i acy and digi al so e eign y, compe i-
ion among incumben s and newcome s (wi h he issue
o hype -concen a ion in BigTech i ms), inno a ion and
he ole o he S a e. We belie e ha CBDCs a e pa o
his end and should be analysed unde he op ics o bo h
da a ica ion and decen alisa ion. Pa icula ly when i comes
o unde s anding he ole o inancial in e media ies in his
shi ing scena io, i is in e es ing o obse e ha CBDCs a e
no he cause o he need o e hink dis ibu ion o adi ional
compe ences, bu a he a consequence o a edis ibu ion
o powe s ha has al eady been ope a ing om wi hin he
inancial sys em.
Fo inancial in eg i y, o pe cei e he shi o powe
dynamics in he ma ke and o unde s and how di e en
playe s in e ac wi h each o he , how new se ice-chains
unc ion, po en ially expanding he ole o public ins i u-
ions, no ably o he cen al banks and FIUs, and whe e he
highe isks ac ually eside, migh be he bigges challenge
in he hands o legisla o s and egula o s. I is hus neces-
sa y o conside he sensibili y o deba es e ol ing a ound
cen alisa ion and decen alisa ion, especially when da a
p o ec ion, cybe secu i y and digi al p i acy a e a s ake and
in e wined wi h he sensi i e opic o go e nmen con ol
ha a ises om he na ionalisa ion o co e in as uc u es.
In a wo ld whe e da a g adually become he mos aluable
asse o be aded, inancial in elligence is ce ainly a ype
o in o ma ion ha should be ea ed wi h ex eme cau ion
and p udence.
The analysis o CBDCs om an AML/CFT s andpoin
equi es an unde s anding o how hese in as uc u es will
be designed and implemen ed. AML/CFT policies will be
acing a new a chi ec u e and nexus o economic ma ke
playe s, which a e aising unexplo ed challenges in e ms
o managemen o AML/CFT isks. Al hough schola s and
egula o s may sus ain ha ce ain models a e inhe en ly
supe io o hei ope a ional ad an ages13 o e en o he
pu poses o sa egua ding agains money launde ing and
o he illici uses,14 ul ima ely, he e will always be colliding
p inciples o be balanced by compe en au ho i ies, such as
he p o ec ion o p i acy, he main enance o inancial in eg-
i y and he s abili y o he sys em, only o name a ew. The
CBDC design ul ima ely adop ed in he Union will, he e-
o e, be a consequence o he weigh and alue a ibu ed
o a ce ain egula o y objec i e, in de imen o o he s. In
his sense, his pape sus ains ha an AML/CFT egula ion
should no ad oca e o a pa icula design, bu a he unde -
s and wha each egula o y choice en ails in e ms o dis i-
bu ion o compe ences be ween s akeholde s, o achie e he
highes s anda ds o inancial in eg i y while p ese ing he
desi ed le el o p i acy.
11 D.Ze zsche -D. A ne —R. Buckley, “Decen alized Finance (De-
Fi)”, Jou nal o Financial Regula ion, Vol. 6, 2020, 172-203.
12 The e m decen alised inance (DeFi) e e s o an open, pe mis-
sionless and highly in e ope able p o ocol s ack buil on blockchain-
based in as uc u e and public sma con ac pla o ms. Mo e
b oadly, he e m has been used o e e o he di e en dis up i e
echnology-based models o inancial se ices, hea ily unde pinned
by hei decen alised in as uc u e. DeFi enables inancial se ices
o be ca ied ou in a mo e open and anspa en manne , elying on
open p o ocols and decen alised applica ions (DApps), whe eby
ag eemen s a e en o ced by code, ansac ions a e execu ed in a
secu e and e i iable way and legi ima e s a e changes pe sis on a
public blockchain. This may c ea e di e en se o a chi ec u es cha -
ac e ised by highly in e ope able inancial sys ems, wi h li le o low
need o cus odians, cen al clea ing houses o esc ow se ices, i.e.
adi ional in e media ies and coun e pa ies.
DeFi uses a mul i-laye ed a chi ec u e, whe e e e y laye se es a
dis inc pu pose. The laye s build on each o he and c ea e an open
and highly composable in as uc u e ha allows s akeholde s o
build on, ehash, o use o he pa s o he s ack. I is also c ucial o
unde s and ha hese laye s a e hie a chical: hey a e only as secu e
as he laye s below. A possible concep ual amewo k o unde -
s anding p o ocol laye s in g ea e de ail was p oposed by F. Schä ,
“Decen alized Finance: On Blockchain- and Sma Con ac -based
Financial Ma ke s”, ci ., and di ides laye s be ween se lemen , asse ,
p o ocol, applica ions and agg ega ion unc ions. O he ca ego isa ion
classi ies laye s in o public base laye wi h digi ally na i e okens,
so wa e p o ocols ha codi y ag eed ules, sma con ac s ha
implemen inancial logic and s ablecoins backed by ese es held a
banks. See N. Ca e -L. Jeng, DeFi P o ocol Risks: The Pa adox o
DeFi, in B. Coen—D. Mau ice (eds.), Reg ech, Sup ech and Beyond:
Inno a ion and Technology in Financial Se ices, RiskBooks.2021.
13 As ecen ly ecognised by he IMF s a , he e is “no uni e sal
case o CBDC adop ion ye ”. IMF S a , “Digi al Money Ac oss Bo -
de s: Mac o-Financial Implica ions”. IMF, 2020. See also IMF S a ,
“Cas ing Ligh on Cen al Bank Digi al Cu ency, IMF”, SDN/18/08.
14 A. Be en sen -F. Schä , “The Case o Cen al Bank Elec onic
Money and he Non-case o Cen al Bank C yp ocu encies”, Fed-
e al Rese e Bank o S . Louis, Vol. 100, No. 2, 2018.
470 G.Soana, T.de A uda
A b ie his o y: heCBDC e olu ion on inancial
in eg i y supe ision
T adi ionally, he ela ionship be ween c edi ins i u ions
and cus ome s was mos ly p o ec ed by he p inciples o
banking sec ecy, which we e ensu ed by s a u o y gua an-
ees in he majo i y o ju isdic ions. Since a leas 1989, he
need o s eng hen inancial sys ems and sa egua d inancial
in eg i y was shi ed o he cen e o in e na ional e o s on
supe ision, culmina ing in a call o ac ion by he G7 a
he Lyon Summi in June 1996. The basic pilla ha money
launde ing should be c iminalised by ju isdic ions can be
da ed a leas om he UN Con en ion agains Illici T a ic
in Na co ic D ugs and Psycho opic Subs ances,15 as u -
he de eloped by he UN Con en ion agains T ansna ional
O ganized C ime, he so-called Pale mo Con en ion.16
While he concep o ob aining he coope a ion o inan-
cial ins i u ions in de ec ing money launde ing ope a ions
may be aced o he UN Decla a ion on C ime and Public
Secu i y, adop ed by he Gene al Assembly h ough Reso-
lu ion 51/60,17 he idea was in e na ionally a i ied h ough
A icle 7 o he Pale mo Con en ion, which exp essly called
S a es o “ins i u e a comp ehensi e domes ic egula o y and
supe iso y egime o banks and non-bank inancial ins i-
u ions and, whe e app op ia e, o he bodies pa icula ly
suscep ible o money-launde ing, wi hin i s compe ence, in
o de o de e and de ec all o ms o money-launde ing,
which egime shall emphasise equi emen s o cus ome
iden i ica ion, eco d-keeping and he epo ing o suspi-
cious ansac ions”.18 F om ha momen onwa ds, S a es
ecognised he need o limi he applica ion o bank sec ecy
laws wi h espec o c iminal ope a ions, and o equi e
inancial ins i u ions o ac o ensu e he in eg i y o bank-
ing sys ems.19 Fu he in e na ional ins umen s, such as he
UN Con en ion Agains Co up ion (UNCAC), he Con en-
ion on Launde ing, Sea ch, Seizu e and Con isca ion o he
P oceeds om C ime (so-called S asbou g Con en ion) and
he OECD Con en ion on Comba ing B ibe y o Fo eign
Public O icials in In e na ional Business T ansac ions pa ed
he way o o he bila e al ag eemen s, memo anda o unde -
s anding and in e na ional mechanisms des ined o sa egua d
inancial in eg i y and es ablish e ec i e measu es o supe -
ision and law en o cemen .
Li e a u e commonly iden i ies ou main phases o AML
egula ion20: (i) du ing he 1970s i was in i s incipien s age,
whe e he emphasis was egula o y and p e en i e in na u e
(i.e. eco d-keeping and suspicious ansac ion epo ing
by banks); (ii) he second s age, s a ed in 1980s, p oduced
c iminalisa ion and in e na ionalisa ion; (iii) in 1989, he
AML egime en e ed a hi d phase (sup a-na ionalisa ion)
wi h he es ablishmen o he Financial Ac ion Task Fo ce
(FATF) in 1989, whose pu pose was o de elop and coo -
dina e he e o s o coun e ML by iden i ying he ail o
money lows in o de o seize and con isca e illici capi-
als sys ema ically. This ad hoc in o mal in e -go e nmen-
al body was la e o become he ins i u ional cen e o a
global sup a-na ional legal egime. Finally, (i ) ollowing
9 No embe 2001, a new phase eme ged when he FATF
manda e was ex ended o also co e e o ism inancing.
Wi h he es ablishmen o he FATF and he subse-
quen issuance o he Fo y Recommenda ions,21 he ole
o inancial ins i u ions and ce ain businesses and p o es-
sions in secu ing he e ec i eness o AML/CFT sys ems
was solidi ied as a minimum s anda d o he amewo k o
he inancial sys em. In his ega d, ea ly FATF ules al eady
con ained key-concep s ha a e essen ial o cu en supe -
ision s anda ds. This is he case o R. 4 o FATF’s Fo y
Recommenda ions, which es ablished ha “coun ies should
ensu e ha inancial ins i u ion sec ecy laws do no inhibi
implemen a ion o he FATF Recommenda ions”. Simila ly,
R. 5 p o ided o obliga ions o unde ake CDD measu es
and p ohibi ed inancial in e media ies om keeping anony-
mous accoun s.22
15 UN, Con en ion agains illici a ic in na co ic d ugs and psy-
cho opic subs ances, 1989, a ailable a : h ps:// www. unodc. o g/ pd /
con e n ion_ 1988_ en. pd .
16 UN, Con en ion agains ansna ional o ganized c ime and he
p o ocols he e o, 2000, a ailable a : h ps:// www. unodc. o g/ docum
en s/ middl eeas andno ha ica/ o gan ised- c ime/ UNITED_ NATIO
NS_ CONVE NTION_ AGAIN ST_ TRANS NATIO NAL_ ORGAN
IZED_ CRIME_ AND_ THE_ PROTO COLS_ THERE TO. pd .
17 UN, Decla a ion on c ime and public secu i y, 1997, a ailable a :
h ps:// digi allib a y. un. o g/ eco d/ 234810? ln= en# eco d- iles- colla
pse- heade .
18 UN, Con en ion agains ansna ional o ganized c ime and he
p o ocols he e o, ci ., a . 7.
19 See also he landma k case in he con ex o he Commonweal h,
Tou nie Na ional P o incial and Union Bank o England [1924]
1KB 461, which es ablished he condi ions unde which banks owed
con iden iali y o hei clien s. The decision held ha banks we e no
equi ed o gua d p i acy in ou ci cums ances, namely whe e com-
pelled ei he by law, public du y, he in e es o he bank o whe e
he clien had consen ed o disclosu e (e en implici ly). See, ex mul-
20 H. Shams, “Legal Globaliza ion: money launde ing law and o he
cases”, Si Joseph Gold Memo ial Se ies, Vol. 5, London, 2004.
21 FATF, The o y ecommenda ions, 1990, a ailable a : h ps://
www. oecd. o g/ news oom/ 27893 71. pd .
22 (Id.
is, Shuman, D.W., “The O igins o he Physician–Pa ien P i ilege
and P o essional Sec e ”, Sou hwes e n L.J., Vol. 29, 661–687, 1985;
Wood, P.R., “Chap e  17 In e na ional Law o Bank Sec ecy”, in
Cu en Legal Issues A ec ing Cen al Banks, Vol. V, In e na ional
Mone a y Fund, 1998; Ly ynenko, A.A., “Da a P i acy and Banking
Sec ecy: Topical Issues in Commonweal h, Con inen al Eu ope and
In e na ional Ju isp udence”, A hens Jou nal o Law, Vol. 5, Issue 3,
303–322, 2019.
Foo no e 19 (con inued)

471
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew ade‑o be weenp i acy…
The Basel Commi ee’s Co e P inciples o E ec i e
Banking Supe ision,23 issued wi h he aim o p o iding
guidance o ju isdic ions wishing o s eng hen hei supe -
iso y egimes, also ensh ined simila obliga ions in i s P in-
ciple 29, which s a ed ha “ he supe iso de e mines ha
banks ha e adequa e policies and p ocesses, including s ic
cus ome due diligence (CDD) ules o p omo e high e hical
and p o essional s anda ds in he inancial sec o and p e en
he bank om being used, in en ionally o unin en ionally,
o c iminal ac i i ies”.24 Inso a as hese p inciples and ec-
ommenda ions began o be ansposed o na ional legisla-
ions, in e media ies s a ed o exe cise a undamen al ole
in inancial supe ision, gi ing ise o he cu en scena io.
F om he las decades o he pas cen u y, au ho i ies seem
o ha e unde s ood ha money launde ing poses h ea s o
bo h economies and inancial ins i u ions. As la gely dem-
ons a ed by economis s, c iminalisa ion o money launde -
ing es s upon legi ima e economic and public in e es s o
ju isdic ions,25 causing di ec and indi ec cos s o socie y.
Conce ning speci ically inancial in e media ies, ML b ings
a leas wo c i ical p oblems: (i) i e odes in e media ies
om wi hin, as he e is o en a posi i e co ela ion be ween
ML and audulen ac i i ies unde aken by employees,26
and (ii) i e odes cus ome us , by inc easing he pe cei ed
isk o deposi o s and in es o s wi h ega ds o ins i u ional
aud and co up ion, hus leading o epu a ional isks. In
addi ion, he inadequacy o inancial in e media ies’ compli-
ance policies may esul in di ec mone a y damages due o
he combined e ec s o ines and all in sha e p ices. These
mic oeconomic aspec s o ML, which may be cha ac e ised
as an economic phenomenon,27 jus i ies he now widely-
accep ed pa icipa ion o banks in AML/CFT.
Al hough banks we e he i s ic ims (and acili a o s)
o ML ac i i ies, o he agen s a e ulne able o he use o
legi ima e paymen and banking channels o s eam lows
o illici o igin. As he sys em e ol es in o a highly digi-
alised en i onmen and e ail ansac ions become inc eas-
ingly in luenced by he di e si ica ion o paymen se ices,
wi h g owing numbe s o c oss-bo de ope a ions and i ual
asse s-led solu ions, he concep o “in e media y” widens
conside ably in scope, shi ing om adi ional banks o se -
ice p o ide s and echnology i ms.
The eliance upon he inancial sec o o moni o suspi-
cious ansac ions and ensu e minimum s anda ds o AML/
CFT is a c ucial ea u e o in e na ional and domes ic inan-
cial in eg i y amewo ks. The coope a ion be ween compe-
en au ho i ies and inancial in e media ies (whe he banks
o non-banks) enables supe iso s o ha e p ope o e sigh
upon he inancial sys em. By shi ing pa o he bu den on
moni o ing and epo ing o ansac ions o inancial ins i-
u ions and es ablishing equi emen s ha p e en money
lows om illici ac i i ies o eely ci cula e in he econ-
omy, coun ies ha e made conside able p og ess on cu bing
money launde ing and ela ed o enses.
While he cu en model, combining join e o s o pub-
lic and p i a e s akeholde s, has been subjec o cons an
e iew and enhancemen , especially in iew o echnological
de elopmen and he sophis ica ion o in ac ions, i has no
su e ed any pa icula dis up ion in e ms o i s essen ial
s uc u e (i.e. ha o using inancial in e media ies as key-
playe s in AML/CFT supe ision).
As seen, adi ional inance, o ma ke -based inance, is
cha ac e ised by majo in e media ies cen alising unc ions
and inancial esou ces. Banks and secu i ies exchanges
b ing oge he a ange o inancial ma ke pa icipan s, in
pa icula hose wi h esou ces (e.g. sa e s, lende s and
in es o s) and hose seeking inancial esou ces (e.g. bo -
owe s, en ep eneu s, e c.). The in e media y is, in his
sense, a cen al poin in adi ional ma ke -based inancial
sys ems, p esen in hei adi ional sec o s o cu ency, pay-
men s, banking, secu i ies and insu ance.
Financial in e media ion elies on us and con idence in
o de o unc ion. While egula ion o hese sys ems o igi-
nally e ol ed as o ms o p i a e o de ing o sel - egula o y
amewo ks, o e ime, he S a e has aken an inc easingly
cen al ole. This is mos ly a esul o ailu es and sys emic
isks ha ended o come o he su ace pe iodically in he
con ex o inancial c ises. The ole o go e nmen egu-
la ion in almos all aspec s o inance, in pa icula in he
a e ma h o he 2008 inancial c isis ha elucida ed he
now-known oo-big- o- ail isks,28 is a e lec ion o such
23 Al hough he o iginal e sion da es om1997, he documen has
been upda ed subsequen ly. See cu en e sion, BCBS, Co e p in-
ciples o e ec i e banking supe ision, 2012, a ailable a : h ps://
www. bis. o g/ publ/ bcbs2 30. h m..
24 Id.
25 See D. Mascianda o, “Economics o Money Launde ing: A
P ime ”, Bocconi Uni e si y Wo king Pape No. 171, 2007; L. Bo -
lini, “Issues o he In e na ional C iminal Regula ion o Money Laun-
de ing in he Con ex o Economic Globaliza ion”, Paolo Ba i Cen e
Resea ch Pape Se ies No. 2008-34, 2008.
26 B. Ba le , “The nega i e e ec s o money launde ing on economic
de elopmen ”, Asian De elopmen Bank, Regional Technical Assis-
ance P ojec No. 5967, May 2002, a ailable a : h p:// www. apgml.
o g/ Index_ iles/ ann_ mee _ doc_ 2002_ public/ pd / ADB's% 20Eco
nomic% 20Res ea ch% 20Rep o % 20F
inal.pd .
27 M. A none—L. Bo lini, “In e na ional An i-Money Launde ing
P og ams: Empi ical Assessmen and Issues in C iminal Regula-
ion”, Bocconi Legal S udies Resea ch Pape No. 1933557, 2011; D.
Mascianda o, “Money launde ing egula ion: he mic o economics”,
Jou nal o Money Launde ing Con ol, Vol. 2, No. 2, 49: D. Mas-
cianda o, “Money launde ing: he economics o egula ion”, Eu o-
pean Jou nal o Law and Economics, Vol. 7, No. 3, 225-40, 1998.
28 See, ex mul is, D. A ne , “Towa ds a new design o in e na ional
inancial egula ion”, Jou nal o In e na ional Economic Law, Vol.
29, 391-453, 2007.
472 G.Soana, T.de A uda
p ocess. Ma ke -based inancial sys ems a e hus o en seen
as uns able, wi h ins abili y and o he o ms o ma ke ail-
u es being add essed by egula ion, albei ne e en i ely
success ully. S a es, go e nmen s and egula o s he e o e
assume an inc easing s ake in main aining he inancial sys-
em’s s abili y and in eg i y, becoming a c ucial pa o he
dynamics o he sec o .
The dominance o concen a ed in e media ies and he
eluc ance o e he cen alisa ion and eliance o inance
in he hands o he S a e uelled he idea o DeFi and i s
ision o inance wi hou in e media ion.29 Unde such
iew, echnology could eplace he complex ne o egula-
o y bu den wi h simple au oma ised solu ions ha enable
a pee - o-pee ne wo k o inancial ac i i ies. Fo p opo-
nen s o he idea, he design would also help mi iga ing he
isks inhe en o concen a ed sys ems. Al hough inno a-
i e echnology does no necessa ily en ail disin e media-
ion, decen alised solu ions (including, o ins ance, sma
con ac s, DLT and decen alised au onomous o ganisa ions)
ha e g adually gained space in inancial ma ke s o e he
pas yea s. Finance wi hou in e media ion b ings wi h i
many implica ions o adi ional egula ion which he global
AML/CFT ne wo k is esponding o. F om an en o cemen
pe spec i e, i he e is no in e media y hen who is espon-
sible o complying wi h AML/CFT equi emen s? The
change in ac ep esen s a signi ican shi in how adi ional
egula ion unc ions. Recen egula o y measu es seem o
ake a “whe e’s wally” app oach o DeFi, which elies on
he assump ion ha somewhe e in he DeFi in as uc u e
he e is p obably an iden i iable pe son o en i y p o id-
ing a se ice ha would ende hem subjec o compliance
wi h AML/CFT equi emen s. While i is p ema u e o say
whe he his will always be he case, i ce ainly indica es
ha AML/CFT egula o s and policy make s will ha e a ole
o play in shaping he e olu ion o DeFi. On he one hand,
his ole could be iewed as e osi e in ha i may d i e
de elope s o mo e away om uly decen alised solu ions,
bu , on he o he , wi hou some deg ee o accoun abili y such
pla o ms may become pa icula ly ulne able o abuse by
c iminals o ML/TF.
In many ways, CBDCs eme ge as a eac ion o DeFi and
i s inc easingly as de elopmen and scalabili y. By launch-
ing CBDC ini ia i es, na ional au ho i ies seemingly aim
o egain space in e ail ansac ions, no ably in he digi al
en i onmen , hus compe ing wi h s ablecoins and o he
c yp o-asse s in o de o sa egua d mone a y and inancial
s abili y, as well as each ju isdic ion’s legal ende . The
de elopmen , p o ision, pa icipa ion and/o con ol o e
CBDCs a e a adical s ep no only o mone a y policy, bu
also o inancial in eg i y. The idea ha go e nmen s may
be able o ully con ol inancial and paymen ansac ions
igge s many issues, spanning om ma e s o go e nmen
us o p i acy and in o ma ional ad an ages. Be o e exam-
ining hese opics, i is impo an o b ie ly summa ise how
he s uc u ing o CBDCs is ac ually being conside ed by
au ho i ies, since each a chi ec u e implies di e en conse-
quences o ou analysis.
On a b oad le el, he a chi ec u es o CBDCs a y un-
damen ally in acco dance wi h he echnology, accessibili y
and dis ibu ion o ope a ional unc ions a ibu ed o each
s uc u e. O he elemen s, such as anonymi y, he domes ic
o c oss-bo de na u e o he s uc u e, ans e mechanisms,
in e es policy, a ailabili y and limi s, may also be balanced
in each design, depending, none heless, on he de ini ion o
he undamen al ea u es men ioned abo e.
One o many: aphysiognomy o CBDCs
As we emba k in ou analysis o CBDCs wi hin he p ism o
he AML/CFT egula ion, i is impe a i e o ame he objec
o ou s udy by d awing he ex e nal and in e nal bounda-
ies o his concep and o de ine he axonomy o he e ms
employed he ein.
F om an ex e nal pe spec i e, he wo ld o c yp o-asse s30
is as and a ied, encompassing ins umen s as di e en as
Bi coin and Diem. Fu he mo e, his is a sec o in cons an
e olu ion ha has expe ienced ellu ic ans o ma ions in he
las decades. F om an in e nal pe spec i e, scanning h ough
Cen al Banks’ whi e pape s, i is appa en ha he e is no
one ype o uni o m de ini ion o CBDC. Ra he , CBDCs
can be be e unde s ood as a ype o digi alised cu ency,
wi h legal ende s a us,31 whose pu pose and echnical
aspec s can a y widely.32
29 See, among o he s, M. Zacha iadis—P. Ozcan, “The API Econ-
omy and Digi al T ans o ma ion in Financial Se ices: The case o
Open Banking”. SWIFT Ins i u e Wo king Pape 2016-001, 2017.
30 Fo he pu poses he ein, we employ he e m “c yp o-asse ” as
de ined in A icle 3(1)(5) o Regula ion (EU) 2023/1114 o he Eu o-
pean Pa liamen and o he Council o 31 May 2023 on ma ke s in
c yp o-asse s (so-called MiCA Regula ion), acco dingly: “’c yp o-
asse ’ means a digi al ep esen a ion o a alue o o a igh ha is
able o be ans e ed and s o ed elec onically using dis ibu ed
ledge echnology o simila echnology”. See, ex mul is, Annun-
zia a, F., “An O e iew o he Ma ke s in C yp o-Asse s Regula ion
(MiCAR)”, Eu opean Banking Ins i u e Wo king Pape Se ies No.
158, 2023.
31 Rega ding legal ende , see, in he UK, sec ion1 o he Cu ency
and Bank No es Ac 1954; in he US, sec ion 16(1) o he Fede al
Rese e Ac  (in conjunc ion wi h sec ion 102 o he Coinage Ac );
and in he EU, A icle 128 TFEU.
32 No ges Bank, Cen al Bank Digi al Cu encies, 1, 2021, 5; D.
Legal—G. O iz Iba ola—C. Blanco, Moneda Digi al del Banco
Cen al: Implicancias pa a la es abilidad inancie a y la poli ica
mone a ia en Pa aguay, Documen os de T abajo n. 27 Banco Cen al
del Pa aguay, 2022, 4.
473
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew ade‑o be weenp i acy…
Le us hen s a by d awing he ex e nal ma gins o
he no ion o a CBDC o subsequen ly iden i y i s in e nal
ca ego ies.33
While he e is no , cu en ly, one se led de ini ion,34
he e a e wo key ea u es ha a e commonly unde s ood
as si ing a he co e o he no ion o CBDCs and ha dis-
inguish hem om o he ypes o c yp o-asse .35 These a e
ha CBDCs a e issued by a Cen al Bank, as hei liabili y,36
and se e as a legal ende wi hin a de ined ju isdic ion.37
These wo cha ac e is ics a e key in unde s anding he
undamen al inno a ion bo e by his new o m o cu ency.
In e ec , c yp o-asse s ha e been in ci cula ion o dec-
ades.38 Howe e , hei issuance and managemen has always
been wi hin he pu iew o he p i a e sec o . In con as ,
CBDCs could be he i s digi al equi alen o he adi ional
“pape ” ia cu ency.39 This means ha hei isk p o ile
would coincide wi h ha o ia cu encies and hei manage-
men and issuance would es solely wi h he Cen al Bank.
CBDCs would, hus, be he i s digi al cu ency ee om
liquidi y and c edi o isk,40 necessa ily s emming om he
eliance on a p i a e in e media y, and ha ope a es on a sin-
gle echnological in as uc u e o an en i e cu ency a ea.
Ha ing d awn he ex e nal bounda y, i is now ime o
di e in o he domain o CBDCs o ace some in e nal dis-
inc ions. Eminen ly, he analysis o he whi e pape s pub-
lished by Cen al Banks wo ldwide e eals ha CBDCs
a e a om a homogeneous g oup. Apa om he, abo e
de ailed, wo common ea u es, he conc e e implemen a-
ions p oposed a y widely depending on he needs iden i-
ied a a egional le el and he alues conside ed p eeminen
by each ju isdic ion.41
The main ca ego ies o CBDCs a e he ollowing: whole-
sale/ e ail; di ec /indi ec ; cen alised/decen alised; and
domes ic/c oss-bo de . I mus be unde lined ha hese
ca ego ies ep esen an abs ac ion o he conc e e models
p oposed and should no be seen as a black and whi e dis-
inc ion. Ra he , mos o he p oposed implemen a ions si
somewhe e in-be ween hese heo e ical pai s.
Le us now b ie ly analyse each ca ego y.
A wholesale42 CBDC is cha ac e ised by no being
di ec ly dis ibu ed o he public bu a he o iden i ied in e -
media ies, o he pu pose o s eamlining hei ecip ocal
se lemen p ocess.43 A e ail CBDC,44 on he o he hand,
is dis ibu ed di ec ly o all pa icipan s o he ma ke and
used in day- o-day ansac ions. I is he la e , he e o e,
he cu ency ha we could uly assimila e o a adi ional
ia cu ency.
Mo eo e , a di ec CBDC is one ha is di ec ly dis ib-
u ed by he Cen al Bank o i s inal use s.45 The sys em in
33 On he e olu ion and classi ica ion o CBDCs, see, in e alia,
Ge a, B., “C yp ocu encies and he E olu ion o Banking, Money
and Paymen s” in B ummed, C., (ed.), C yp o-asse s—Legal, egula-
o y and mone a y pe spec i e, Ox o d Uni e si y P ess, 2019; Ge a,
B., G ünewald, S., Zellwege -Gu knech , C., “The E-Bankno e as a
‘Bankno e’: A Mone a y Law In e p e ed”, 41:4 Ox o d Jou nal o
Legal S udies 1119, 2021.
34 Fo a e iew o some o he exis ing de ini ions see S. Allen, e al.
Design choices o cen al bank digi al cu ency: Policy and ech-
nical conside a ions, No. w27634. Na ional Bu eau o Economic
Resea ch, 2020, 11.
35 See he de ini ion p o ided by he In e na ional Mone a y Fund,
“CBDC is a new o m o money, issued digi ally by he cen al bank
and in ended o se e as legal ende ” in IMF S a Discussion No e,
Cas ing Ligh on Cen al Bank Digi al Cu encies, 2018; see also he
de ini ion p o ided by he US Fede al Rese e, “CBDC is de ined as
a digi al liabili y o he Fede al Rese e ha is widely a ailable o he
gene al public” in Fede al Rese e, Money and Paymen s: The U.S.
Dolla in he Age o Digi al T ans o ma ion, 2022.
36 Bank o In e na ional Se lemen s, Cen al Bank Digi al Cu en-
cies: sys em designs and in e ope abili y, Basel, 2021, 4.
37 No ges Bank, Cen al Bank Digi al Cu encies, ci ., 5, 13.
38 So-called Comme cial Bank Money a e a classic example o p i-
a ely issued cu encies, see M. Klein—J. G oss—P. Sandne , The
digi al eu o and he ole o DLT o cen al bank digi al cu encies in
F ank u School o Finance & Managemen GmbH, FSBC Wo king
Pape , 2020, 4.
39 S. Allen, e  al. Design choices o cen al bank digi al cu -
ency: Policy and echnical conside a ions, ci ., 10. See also Ge a,
B., G ünewald, S., Zellwege -Gu knech , C., “The E-Bankno e as a
‘Bankno e’: A Mone a y Law In e p e ed”, ci .
40 On he isk- ee na u e o Cen al Bank money, M. Klein—J.
G oss—P. Sandne , The digi al eu o and he ole o DLT o cen-
al bank digi al cu encies, ci ., 4, 12, “a e ail CBDC is, like cash,
a isk- ee means o paymen , bu in a digi al o m”; R. Aue —R.
Böhme, Cen al bank digi al cu ency: he ques o minimally in a-
si e echnology, No. 948. Bank o In e na ional Se lemen s, 2021,
41 M. Klein—J. G oss—P. Sandne , The digi al eu o and he ole o
DLT o cen al bank digi al cu encies, ci ., 12-13.
42 Ibid., 11.
43 Fo an example see he mB idge p ojec join ly de eloped by
BIS Inno a ion Hub Hong Kong Cen e, he Hong Kong Mone a y
Au ho i y, he Bank o Thailand, he Digi al Cu ency Ins i u e o
he People's Bank o China and he Cen al Bank o he Uni ed A ab
Emi a es, Bis Inno a ion Hub, P ojec m-B idge. Connec ing econo-
mies h ough CBDC, Oc obe 2022.
44 N. Poche —A. Vene is, P i acy and anspa ency in cbdcs: A eg-
ula ion-by-design aml/c scheme, in IEEE T ansac ions on Ne wo k
and Se ice Managemen , 2021, 1; D. Legal—G. O iz Iba ola—C.
Blanco, Moneda Digi al del Banco Cen al: Implicancias pa a la
es abilidad inancie a y la poli ica mone a ia en Pa aguay, ci ., 4.
45 Fo a isual ep esen a ion o hese h ee models see R. Aue —R.
Böhme, Cen al bank digi al cu ency: he ques o minimally in a-
si e echnology, ci ., 10.
5; Eu opean Cen al Bank, Repo on a digi al Eu o, Oc obe 2020,
7. While i is ue ha a digi al o m o Cen al Bank money al eady
exis s, i.e. Cen al Bank ese es, hese a e only accessible o a e y
limi ed numbe o in e media ies and can, hus, no be compa ed o
classic ia cu encies, Bank o England, Cen al Bank Digi al Cu -
ency Oppo uni ies, challenges and design, ci ., 7.
Foo no e 40 (con inued)
474 G.Soana, T.de A uda
his model has one laye 46: he Cen al Bank manages he
ne wo k and p o ides he se ices—sa ekeeping, exchange
e c.—and he use s ansac wi hin his en i onmen in a
pee - o-pee ashion. In he indi ec model, an in e media e
laye is in oduced.47 While he issuance and he main e-
nance o he unde lying ne wo k is s ill in he hands o he
Cen al Bank, all use - acing ac i i ies a e pe o med by
au ho ised in e media ies.48 This implemen a ion discha ges
he Cen al Bank om all cus ome - ela ed ac i i ies and, in
a way, eplica es he o ganisa ional s uc u e o adi ional
inancial ma ke s.49 A hi d hyb id model is also possible.
Wi hin he la e , use s can bo h a ail hemsel es o in e me-
dia ies and ansac pee - o-pee . Usually, he pee - o-pee
unc ion is only p o ided o small deposi s and low- alue
ansac ions, whe eas, o la ge deposi s, cus ome s mus
use in e media ies.50
The c ucial di e ence be ween he cen alised and decen-
alised model es s in he echnology used by he Cen al
Bank. Eminen ly, i he Cen al Bank chooses o implemen
he cu ency h ough a decen alised ledge o h ough a
“ adi ional” cen alised ledge .51 I is impo an o unde -
line ha , e en when a DLT is chosen, i will p obably no
esemble he public blockchain o he main c yp o-asse s, as
Bi coin o E he eum.52 Ra he , o p ese e he public con-
ol o e he cu ency’s issuance and managemen , CBDCs
end o implemen a pe missioned blockchain ha a o ds a
a ying le el o cen alised con ol and go e nance o he
Cen al Bank.53
Finally, he CBDC can be designed as domes ic, c oss-
bo de 54 o as indi e en o geog aphical loca ion. This
depends on whe he he cu ency can be spen , acqui ed,
and used ou side he geog aphical bo de s o he issuing
ju isdic ion. A domes ic CBDC is one ha can only be used
inside he issuing ju isdic ion.55 An exclusi ely c oss-bo de
CBDC is one ha can only be used o ansna ional ansac-
ions. Finally, a CBDC is indi e en o geog aphical loca ion
when, jus like cash, can be spen e e ywhe e, solely based
on he accep ance by he payee.
I is clea how each o hese implemen a ions poses a
subs an ially di e en isk in e ms o an i-money laun-
de ing. The capilla i y o he CBDC’s dis ibu ion ( e ail/
wholesale), i s e i o ial scope and he p esence o eliable
in e media ies a e key in he assessmen o he an i-money
launde ing isk. Apa om he isk- ac o , he way a CBDC
is designed impac s he s uc u e o he an i-money laun-
de ing go e nance and con ols. Fo ins ance, a di ec coin
would p o oundly edesign he go e nance o an i-money
launde ing, as he Cen al Bank would be he sole en i y able
o iden i y and moni o use s. In con as , an indi ec CBDC
would esemble much mo e he classic model wi h in e me-
dia ies managing use - acing ac i i ies and he Cen al Bank
ac ing as supe iso .56
In his sense, when speaking abou CBDCs and AML, i
is c ucial o dis inguish be ween each ype o implemen a-
ion. We should no a all c yp o-asse s wi h he same b ush
46 N. Poche —A. Vene is, P i acy and anspa ency in cbdcs: A eg-
ula ion-by-design aml/c scheme, ci , 2.
47 S. Allen, e al. Design choices o cen al bank digi al cu ency:
Policy and echnical conside a ions, ci ., 10, “cen al banks would
dissemina e CBDC o comme cial banks–jus as hey now do wi h
cash–and comme cial banks would dis ibu e hese o indi iduals and
businesses by se ing up and managing digi al walle s”.
48 D. Legal—G. O iz Iba ola—C. Blanco, Moneda Digi al del
Banco Cen al: Implicancias pa a la es abilidad inancie a y la poli -
ica mone a ia en Pa aguay, ci ., 5; see he model p oposed by Eu o-
pean Cen al Bank, Repo on he Digi al Eu o, ci ., 25.
49 Di ec /indi ec CBDCs should no be con used wi h so-called syn-
he ic CBDCs—whe e he CB only manages he issuance o he cu -
ency o inancial ins i u ions wi h he managemen o accoun s and
unds en i ely le o hese en i ies—which a e ou o he pu iew
o he p esen a icle, o an analysis syn he ic CBDCs, see Bank o
In e na ional Se lemen s e . al., Cen al bank digi al cu encies: oun-
da ional p inciples and co e ea u e, 2020,4.
50 The Whi e House, Technical e alua ion o a U.S. Cen al Bank
digi al cu ency sys em, Washing on, 2022.
51 Bank o England, Cen al Bank Digi al Cu ency Oppo uni ies,
challenges and design, London, 2020, 6.
52 M. Klein—J. G oss—P. Sandne , The digi al eu o and he ole o
DLT o cen al bank digi al cu encies, ci ., 7.
53 See, The Whi e House, Technical e alua ion o a U.S. Cen al
Bank digi al cu ency sys em, ci ., 11, “a pe missionless app oach
does no make sense o a sys em ha has a leas one us ed en i y
54 Exclusi ely in e na ional CBDCs a e usually also wholesale and
a e p oposed as a means o s eamline la ge c oss-bo de ansac ions
among wo o mo e ju isdic ions. See, as an example, he MB idge
p ojec de eloped by he Bank o In e na ional Se lemen s in coop-
e a ion wi h he Bank o China, he Bank o Thailand, Hong Kong
Mone a y Au ho i y, and he Cen al Bank o he UAE a h ps://
www. bis. o g/ publ/ b och u e_ mb id ge. pd
55 Bank o England, Cen al Bank Digi al Cu ency Oppo uni ies,
challenges and design, ci ., 21.
56 See he model p oposed by, Bank o England, Cen al Bank
Digi al Cu ency Oppo uni ies, challenges and design, ci ., 27. I
is impo an o unde line ha , wi h espec o he Cen al Bank, he
issuance o a CBDC would, in any case, ede ine i s ole. E en in a
wo-laye ed in as uc u e he CB would ha e di ec access and man-
age a ledge eco ding all ansac ions ca ied ou wi h he connec ed
digi al cu ency. This would be subs an ially di e en o he cu en
model whe e digi al ledge s a e p i a ely held by inancial ins i u-
ions and CBs only eco d he issuance o cash wi hou any con ol
on ansac ions. See also, Bank o In e na ional Se lemen s, Cen al
Bank Digi al Cu encies: sys em designs and in e ope abili y, ci ., 5,
“in any CBDC sys em, he cen al bank would ace addi ional ope a-
ional o o e sigh asks and accompanying challenges ega dless o
he di ision o esponsibili ies among he a ious ac o s”.
(i.e. he cen al bank). I is possible ha he echnology unde pinning
a pe missionless app oach will imp o e signi ican ly o e ime, which
migh make i mo e sui able o be used in a CBDC sys em. Howe e ,
gi en he s a e o he echnology, mos o he analysis ha ollows
assumes ha he e is a cen al au ho i y and a pe missioned CBDC
sys em”; No ges Bank, Cen al Bank Digi al Cu encies, ci ., 30.
Foo no e 53 (con inued)
481
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew ade‑o be weenp i acy…
in es iga ion phase was launched by he Go e ning Coun-
cil77 and a ( en a i e) imeline was d awn.78 Acco ding o
his imeline, we migh be jus a ew mon hs away om
he launch o he ealisa ion phase—as he decision o he
Go e ning Council is cu en ly scheduled o he au umn
o 2023.
In pa allel wi h his echnical e o by he ECB, he Com-
mission has been wo king on he legisla i e g oundwo k
needed o enable he launch o a Eu opean CBDC. Emi-
nen ly, as unde lined by he Eu oG oup, “ he in oduc ion o
a digi al eu o as well as i s main ea u es and design choices
equi es poli ical decisions ha should be discussed and
aken a he poli ical le el”.79 To his end, he Commission is
expec ed o adop , in he second qua e o 2023, a p oposal
o a Digi al Eu o Regula ion.80 The Regula ion, oo ed in
A icle 133 TFEU, shall delinea e he essen ial aspec s and
key design ea u es o he cu ency and will p o ide o he
ECB a poli ical manda e o he issuance o he coin.81
We may, hence, be a he e e o he Digi al Eu o’s launch.
Once he poli ical and he echnical dimensions align, he e
will be i ually no hing in he way o i s launch.
The ecen Eu opean accele a ion can be mainly con-
nec ed o he a ising public and p i a e compe i ion. The
main d i e o he ECB being ha , in an inc easingly cash-
less socie y, p i a e (s ablecoins) o public ( o eign CBDCs)
digi al coins may signi ican ly displace o e en eplace he
Eu o and Eu opean inancial ins i u ions.82 As epi omised by
he Lyb a p ojec , global ech companies could exploi hei
use base and ne wo k o subs i u e inancial ins i u ions and
cen al banks. The same goes (e en hough, a leas in he
sho e m, o a lesse ex en ) o o eign CBDCs, wi h China
in an ad anced phase in he de elopmen and launch o i s
e- enminbi.
This scena io would ha e bo h economic and poli ical
e ec s. In he o me sense, i would displace Eu opean
companies in a ou o global ones. Fu he , i would con-
e he con ol (and mone isa ion) o Eu opean inancial da a
o global, o eign companies u he expanding he, al eady
exis ing, knowledge gap. In he la e sense, he widesp ead
use o a p i a e o o eign cu ency would a ec Eu opean
mone a y so e eign y by signi ican ly limi ing he abili y o
he ECB o in luence he money ma ke . The Digi al Eu o
he e o e is concei ed as a ma ke - esponse o coun e his
end so as o p ese e mone a y so e eign y and compe i-
i eness.83 A he same ime, a CBDC is also seen as a means
o u he expand he s a egic impo ance o he Eu o in
global ma ke s.84
E en hough se e al choices as o he design and ea u es
o he Digi al Eu o s ill ha e o be made, ce ain undamen-
al elemen s seem o be i m, a leas so a .
Fi s , he Digi al Eu o will be a liabili y o he Cen al
Bank di ec ly dis ibu ed o he gene al public o be used o
e ail ansac ions.85 Second, he Digi al Eu o will ely on
supe ised in e media ies o use - acing ac i i ies including
coin dis ibu ion. The ECB will solely e ain con ol o e he
issuance and se lemen o he cu ency wi h all o he ac i i-
ies en us ed o p i a e in e media ies.86 Thi d, he Digi al
Eu o is expec ed o be accessible also ou side o he Eu o
a ea, e en hough ce ain es ic ions will be imposed.87
Acco ding o ou p e ious ca ego isa ion, he Digi al
Eu o, as cu en ly ou lined, would hen be a e ail, non-
syn he ic, indi ec and indi e en o geog aphical loca ion
CBDC.
77 Eu opean Cen al Bank, Eu osys em launches digi al eu o p ojec ,
July 2021, h ps:// www. ecb. eu opa. eu/ p ess/ p / da e/ 2021/ h ml/ ecb.
p 210 714~d9919 8ea23. en. h ml
78 Eu opean Cen al Bank, Digi al Eu o P ojec Timeline, 2021,
h ps:// www. ecb. eu opa. eu/ paym/ digi al_ eu o/ sha ed/ pd / Digi al_
eu o_ p oje c _ imel ine. en. pd
79 Eu og oup, s a emen on he digi al eu o p ojec , 16 Janua y 2023,
h ps:// www. consi lium. eu opa. eu/ en/ p ess/ p ess- elea ses/ 2023/ 01/ 16/
eu og oup- s a e men - on- he- digi al- eu o- p oje c - 16- janua y- 2023/
80 See h ps:// ec. eu opa. eu/ in o/ law/ be e - egul a ion/ ha e- you - say/
ini i a i es/ 13392-A- digi al- eu o- o - he- EU_ en
81 See h ps:// ec. eu opa. eu/ in o/ law/ be e - egul a ion/ ha e- you - say/
ini i a i es/ 13392-A- digi al- eu o- o - he- EU_ en.
82 See he con inuous e e ence by Eu opean Ins i u ions o s a egic
au onomy as he a ionale o he in oduc ion o he Digi al Eu o, see
ex mul is Eu og oup, s a emen on he digi al eu o p ojec , ci .
83 This s a egy is pai ed wi h a mo e adi ional policy esponse A
clea example being he ecen ly app o ed Ma ke in C yp o-asse
Regula ion (MiCA) ha p o ides o limi a ions o he possibili y o
p i a e companies o issue s ablecoins and e en a e o powe when
such coins menace mone a y so e eign y.
84 As s a ed by Eu opean Cen al Bank, Repo on he Digi al Eu o,
ci ., 9, “A digi al eu o could be issued (i) o suppo he digi alisa-
ion o he Eu opean economy and he s a egic independence o he
Eu opean Union; (ii) in esponse o a signi ican decline in he ole
o cash as a means o paymen , (iii) i he e is signi ican po en ial
o o eign CBDCs o p i a e digi al paymen s o become widely used
in he eu o a ea, (iii) as a new mone a y policy ansmission chan-
nel, (i )) o mi iga e isks o he no mal p o ision o paymen se -
ices, ( ) o os e he in e na ional ole o he eu o, and ( i) o sup-
po imp o emen s in he o e all cos s and ecological oo p in o he
mone a y and paymen sys ems”.
85 Eu opean Cen al Bank, Repo on a digi al Eu o, ci ., 6.
86 Eu opean Cen al Bank, P og ess on he in es iga ion phase o a
digi al eu o, ci ., 1-2, “The Eu osys em has always made i clea ha
he digi al eu o should be a ailable h ough supe ised in e media -
ies”; his same wo- ie ed app oach had al eady been adop ed in he
i s epo on he ma e see Eu opean Cen al Bank, Explo ing ano-
nymi y in Cen al Bank Digi al Cu encies, 4, 2019, 4.
87 See Requi emen n. 6 o Eu opean Cen al Bank, Repo on a digi-
al Eu o, ci ., 14, “The digi al eu o should be po en ially accessible
ou side he eu o a ea in a way ha is consis en wi h he objec i es o
he Eu osys em and con enien o non-eu o a ea esiden s”.

482 G.Soana, T.de A uda
The ade‑o be weenp i acy and aceabili y:
heDigi al Eu o app oach
Wi h he ealisa ion phase apidly app oaching, he nex
mon hs will be c ucial o unde s and how he p i acy/
anspa ency equilib ium will be s uck. P i acy conside a-
ions should be a he co e o he Digi al Eu o’s a chi ec-
u al design, e lec ing obse ance o undamen al igh s
ensh ined by he EU Cha e .88 None heless, he CBDC’s
echnical ea u es shall de e mine in wha measu e p i acy
shall be coun e -weigh ed wi h con ol. The key decisions
ega ding moni o ing will (and should) be made du ing he
design phase o he Digi al Eu o. Eminen ly, o CBDCs
moni o ing is i s and o emos an a chi ec u al p oblem.
Once he po en ial o con ol is c ea ed h ough a ce ain
a chi ec u e, ex pos legisla i e limi a ions can only o e
pa ial eso .
Pe haps he main p i acy ques ion cu en ly aced by
legisla o s, when conside ing CBDCs, is he deg ee o
expansion o he S a e’s moni o ing po en ial i espec i e
o he legal amewo k. As unde lined by he a o emen ioned
Whi e House Repo , once he po en ial is c ea ed, no hing
impedes u u e go e nmen s o exploi i . I and o wha
ex en his possibili y should be c ea ed is, hence, a ma e
o design much mo e han implemen a ion. In his sense,
uni ying in a single ledge , en us ed o a public au ho i y,
mos (and, po en ially, in he u u e, all) inancial ansac-
ions ca ied ou in he Eu o a ea a e an a chi ec u al choice
ha equi es s ong gua an ees and ca e ul conside a ion.
The ECB has made, since i s i s s eps in he ield, p i-
acy o e ly a key opic in he Digi al Eu o’s esea ch. One
o he undamen al equi emen s (R2) he Digi al Eu o
should abide o—acco ding o he i s Repo on he Digi al
Eu o—is ha i should ha e cash like ea u es. This means
“a digi al eu o aiming o ackle a decline in he accep ance
o cash should pe mi o line paymen s. Mo eo e , a digi al
eu o should be easy o ulne able g oups o use, ee o
cha ge o basic use by paye s and should p o ec p i acy.
I should ha e a s ong Eu opean b anding”.89
As an ins umen ha aims a becoming he digi al dop-
pelgange o cash, he ques ion is how simila should he
Digi al Eu o be o cash in e ms o anonymi y. This is also
aking in o accoun he di e ences be ween he wo ins u-
men s in e ms o AML isk p o ile. While anonymous, cash
is always cons ained by i s physical dimension. To pay o
s ash, especially la ge sums, cash has o be anspo ed and
concealed. In con as , he Digi al Eu o has he same cha -
ac e is ics o imma e iali y, ola ili y and globali y o EFTS
making he second (i equal anonymi y was o be p o ided)
much iskie han he i s .
The ECB is qui e clea in s a ing ha he ull anonymi y
gua an eed by cash will no be a iable op ion o a CBDC.90
This is no only due o i s po en ial o illici use, bu also as
he lack o use s iden i ica ion equi emen s would p e en
he ECB om imposing any limi a ions in he use o he
coin.
The ECB seems o ha e li ed a pa ial e olu ion in i s
app oach o he opic. In i s i s pape , published in 2019,
well be o e he Digi al Eu o p ojec , he ECB had indeed
explo ed he possibili y o (a leas nominally) anonymous
paymen s. The pape , i led “Explo ing anonymi y in Cen-
al Bank Digi al Cu encies”, p oposed o c ea e a ouche
sys em ha would gi e o each use a ce ain amoun o
anonymi y ouche .91 The ouche s would be ime limi ed,
non- ans e able and would be issued, ee o cha ge, a eg-
ula in e als. I he use wished o ca y ou an anonymous
ansac ion, hey had o a ach he ouche o he ansac ion
(one ouche o one coin) his way sub ac ing he speci ic
ansac ion om he con ol o he AML Au ho i y. Namely,
i was he same pape ha en isioned he in oduc ion o an
AML au ho i y. The au ho i y would ha e he du y o il e
each and e e y ansac ion (excep he anonymous one) wi h
he powe o ei he app o e o ejec hem.
This i s p oposal seemed o be a om a sa is ac o y
solu ion o he p i acy p oblem. Namely, gi ing o a public
au ho i y he powe o il e all inancial ansac ions and o
ejec hem gene a ed (apa om easibili y doub s) a gen-
e al ex an e con ol sys em. A he same ime, he anonymi y
ouche sys em seemed a om anonymous. When a use
spends an anonymi y ouche , he only e ec is ha i ci -
cum en s he AML au ho i y’s il e . This, howe e , means
he ansac ions a e s ill egis e ed (pe mi ing ex pos in es-
iga ion and aceabili y) and isible o he in e media ies.
Basically, he pape c ea es a p e iously non-exis en con ol
(ex an e il e ing and app o al by a public AML Au ho i y)
and hen gi es use s a limi ed numbe o imes hey can
ci cum en i .
A e his i s mo e “c ea i e” solu ion, he ECB seems
o ha e gone back o he adi ional model—whe e moni o -
ing du ies a e comple ely en us ed o p i a e in e media ies.
This was clea ly s a ed in he 2022 Digi al Eu o p og ess
88 See, in pa icula , A icles 7 and 8 o he Cha e .
89 Eu opean Cen al Bank, Repo on he Digi al Eu o, ci ., 11.
90 This was al eady s a ed by he Eu opean Cen al Bank, Repo on
he Digi al Eu o, ci ., 21, and has been ei e a ed in Eu opean Cen-
al Bank, P og ess on he in es iga ion phase o a digi al eu o, ci , 7:
“ ull anonymi y is no conside ed a iable op ion om a public policy
pe spec i e. I would aise conce ns abou he digi al eu o po en ially
being used o illici pu poses (e.g. money launde ing and he inanc-
ing o e o ism). In addi ion, i would make i i ually impossible o
limi he use o he digi al eu o as a o m o in es men —a limi a ion
ha is essen ial om a inancial s abili y pe spec i e”.
91 Eu opean Cen al Bank, Explo ing anonymi y in Cen al Bank
Digi al Cu encies, ci ., 6.
483
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew ade‑o be weenp i acy…
epo 92 “in a baseline scena io, compa ible wi h he cu -
en egula o y amewo k, a digi al eu o would p o ide a
le el o p i acy equal o ha o cu en p i a e sec o digi-
al solu ions. Use s would need o iden i y hemsel es when
hey s a using he digi al eu o, and in e media ies would
pe o m cus ome checks du ing onboa ding. Pe sonal and
ansac ion da a would only be accessible o in e media -
ies o he pu pose o ensu ing compliance wi h an i-money
launde ing and comba ing he inancing o e o ism (AML /
CFT) equi emen s and ele an p o isions unde EU law”.
No wi hs anding he Bank’s s a emen s, he sys em would
ha dly co espond o he cu en a chi ec u e, whe ein in e -
media ies pe o m AML checks and a e he essen ially he
only en i ies ha ing access o he ledge . The Digi al Eu o
adds a new, o e a ching playe : he cen al bank. As he la -
e would manage issuance and ansac ions, he ECB would
necessa ily need o ha e a ce ain le el o con ol o e he
CBDC’s ledge . E en hough he iden i ying in o ma ion
would be s o ed by in e media ies, his does no change he
ac ha he Digi al Eu o’s ledge would be much mo e in el-
ligible (as would uni y all ansac ions in a single ledge ) and
ha he ECB would s ill ha e access o all ansac ions, e en
i in a pseudonymous ashion. While i is ue ha he ECB
p omises o design he Digi al Eu o “in a way ha aims o
minimise he Eu osys em’s in ol emen in he p ocessing o
use s’ da a93” his does no change he ac ha he in a-
s uc u e is he e, he po en ial is c ea ed.
P obably conscious o his elemen , he ECB u he
s a es ha “ he Eu osys em has no in e es in exploi ing indi-
idual paymen da a o any pu pose. This s ands in con as
o he mone isa ion o indi idual paymen da a by p i a e
companies94”. This seems o ep esen a pa ial ake on he
p oblem o p i acy. While i is ue ha cen al banks ha e
no comme cial in e es in use s’ da a, his does no mean
hey do no ha e any ype o in e es . Comme cial in e es is
ce ainly no one o he p ima y conce ns (o a leas no he
only) when dealing wi h moni o ing. Immig a ion, poli ics,
c ime con ol, ax e enue a e jus some o he easons why
he public au ho i y would wan o access he Digi al Eu o’s
ledge . Some o he oldes and undamen al ules p o ec ing
p i a e spaces sa egua d he indi idual agains in usions
o he S a e o easons a om comme cial. In his sense,
s a ing ha , since he Bank has no comme cial in e es in
consume da a, he Digi al Eu o would gua an ee a highe
le el o p i acy, seems like a mis ep esen a ion.
In his sense, he ECB needs o be e cla i y how i will
gua an ee ha —i he legacy in e media y-cen ed model
o inancial moni o ing is implemen ed— he Bank does no
become a second moni o ing laye buil on op. A he same
ime, he ECB, i his model was o be implemen ed, should
be clea in i s public s a emen s ha , a leas om a inancial
moni o ing pe spec i e, he Digi al Eu o is no digi al cash,
a he i is an EFTS sys em oo ed in a public in as uc u e.
A clea communica ion o he isk p o ile associa ed wi h
he Digi al Eu o is c ucial o gua an ee indi iduals can make
in o med decisions ega ding hei willingness o swi ch
om cash o CBDC.
I in e media y-based ansac ions a e he main ansac-
ion sys em, he ECB also en isions a second possibili y:
o line ansac ions.95 Such ansac ions would be a com-
plemen a y op ion en isioned o low alue ansac ions.
Thei in oduc ion is explici ly deemed u he away in
ime so, p obably, o be in oduced a e he launch o he
Digi al Eu o. One o he easons o i s launch being he
necessi y o p o ide o a mo e p i a e o m o CBDC. An
o line solu ion, as ske ched in he epo s, would p obably
wo k h ough a de ice unded by use s. Once unded, he
use s would exchange he CBDC h ough close p oximi y
exchange echnology (which would limi he globali y isk).
This sys em would gua an ee a highe le el o p i acy as he
ansac ions would be pee - o-pee and he ledge would be
s o ed indi idually by each de ice. To u he limi he AML
isk, quan i a i e limi a ions simila o he ones al eady in
place o cash could be designed in he de ice bo h in e ms
o maximum holding and ansac ion.
This second o line solu ion would ce ainly ep esen
a a be e op ion in e ms o p i acy and, i pai ed wi h
online ansac ions, could mimic he cu en equilib ium
among cash and EFTS. A he same ime, i co ec ly
designed, an o line CBDC could gua an ee highe compli-
ance han cash in e ms o quan i a i e limi s as es ic ions
could be implemen ed by-design.
92 Eu opean Cen al Bank, Repo on he Digi al Eu o, ci ., 21, and
has been ei e a ed in Eu opean Cen al Bank, P og ess on he in es-
iga ion phase o a digi al eu o, ci ., 7 and Eu opean Cen al Bank,
P og ess on he in es iga ion phase o a digi al eu o—second epo ,
21 Decembe 2022, 2.
93 Eu opean Cen al Bank, P og ess on he in es iga ion phase o a
digi al eu o, ci ., 8.
94 This same app oach is ei e a ed in o he s a emen s o he ECB
see F. Pane a, A Digi al Eu o o he Digi al E a, In oduc o y S a e-
men a he ECON Commi ee o he Eu opean Pa liamen , F ank u
am Main, 12 Oc obe 2020, “A digi al eu o would inc ease p i acy
in digi al paymen s hanks o he in ol emen o he cen al bank,
which—unlike p i a e supplie s o paymen se ices—has no com-
me cial in e es s ela ed o consume da a”.
digi al eu o would inc ease p i acy in digi al paymen s hanks o he
in ol emen o he cen al bank, which—unlike p i a e supplie s o
paymen se ices—has no comme cial in e es s ela ed o consume
da a.
95 Eu opean Cen al Bank, Repo on a digi al Eu o, ci ., 31; Eu o-
pean Cen al Bank, P og ess on he in es iga ion phase o a digi al
eu o, ci ., 8; Eu opean Cen al Bank, P og ess on he in es iga ion
phase o a digi al eu o—second epo , ci ., 9.
484 G.Soana, T.de A uda
Ins i u ional manda es andlegal bounda ies
Wi h e e ence o he ounda ional p inciples o he Union,
A icle 128(1) TFEU has been co ec ly iden i ied as one
o he main legal sou ces o he issuance o CBDCs, since
i es ablishes he compe ence o he Eu osys em o issue
bankno es, wi hou , howe e , ci cumsc ibing limi a ions as
o i s o mal o ope a ional cha ac e is ics. As poin ed ou
by specialised li e a u e, i s ems om A icle 128(1) TFEU
ha Eu ono es could, in ac , be angible o digi al in o -
ma ,96 which en ails ha no majo legal obs acle exis s o
he implemen a ion o a digi al EU cu ency. Such ules a e
complemen ed by he a o emen ioned A icle 133 TFEU,
which lays down he powe s o he ECB, he Eu opean Pa -
liamen and he Council, ac ing in acco dance wi h he o di-
na y legisla i e p ocedu e, o es ablish he measu es neces-
sa y o he use o he eu o as he single cu ency.
As he choice o he indi ec model o he Digi al Eu o
seems solidi ied by now,97 a wo- ie ed s uc u e will allow
in e media ies o con inue being esponsible o bea ing
he esponsibili ies in connec ion wi h p o iding in e ace
solu ions o end use s (e.g. echnology choice, da a man-
agemen , cus ome onboa ding, sc eening and moni o ing,
e c.). This, na u ally, implica es ha ensu ing egula o y
compliance wi h AML/CFT obliga ions98 should emain in
he hands o he exis ing s akeholde s, wi hou majo shi s
in oles. None heless, gi en ha he scena io now expands
o a digi al en i onmen , wi h a highe numbe o playe s
and p oduc s, i is impo an o ensu e ha an alignmen
exis s as o he obliga ions and esponsibili ies applicable o
in e media ies o di e en ca ego ies ha choose o ansac
Digi al Eu o o o p o ide se ices in connec ion wi h such
ansac ions.
The Digi al Eu o Regula ion should, in his sense, be able
o es ablish a b idge no only be ween he Union’s CBDC
and he discipline o paymen se ices unde he PSD299
and he EMD2,100 bu also wi h he new digi al inance leg-
isla ion. Rega ding he la e , while i is ue ha he MiCA
Regula ion ca es ou CBDCs om i s scope o applica-
ion,101 he in e ela ionship be ween he go e nance o
c yp o-asse s and ha applicable o he Digi al Eu o, pa -
icula ly om a inancial in eg i y s andpoin , bu also om
a licensing and conduc o business pe spec i e, is s ill o
be cla i ied. Fo example, he ules applicable o asse - e -
e enced okens (ARTs) as o supe ision and en o cemen o
AML/CFT ma e s should be expec ed o be a leas consis -
en wi h hose applicable o he Digi al Eu o. The e en ual
case o in e ope abili y—s ill la gely unknown i a all easi-
ble—be ween ARTs and he Digi al Eu o adds e en u he
complexi y o he ma e and aises he ba wi h espec o
he need o a comp ehensi e se o ules ha is capable o
ensu ing a common g ound o digi al inance.
Mos impo an ly, i EU legisla o s ul ima ely op o
allow o embedded ea u es in he Digi al Eu o as o enable
au oma ed p ocesses o AML/CFT ou ines, he limi s and
condi ions o such exe cises should be ca e ully se ou . I
is unclea which obliga ions a e o emain in he hands o
in e media ies and which will be—pa ially o en i ely—
au oma ised h ough RegTech and/o SupTech solu ions:
cus ome due diligence, suspicious ansac ion epo ing and
eco d-keeping and among he ypical AML/CFT p ocedu es
ha may be en us ed o au oma isa ion, also o he bene i
o end use s.102
Finally, an ins i u ional go e nance ha s ikes a bal-
ance be ween e iciency and accoun abili y should also be
a c ucial poin o be u he delinea ed in he Digi al Eu o’s
design. As i s ands, a leas h ee majo EU supe iso s
will ha e some le el o compe ence o e CBDC ansac-
ions, depending on he aspec o be co e ed: (i) conce ning
da a p o ec ion, he EU Da a P o ec ion Supe iso (EDPS);
(ii) o inancial in eg i y, he new An i-Money Launde ing
96 Fo a comp ehensi e analysis on he legal easibili y o he Digi-
al Eu o, see G unewald, S., Zellwege -Gu knech , C. and Ge a, B.,
“Digi al Eu o and ECB Powe s” (Ma ch 19, 2021). Common Ma ke
Law Re iew, Vol. 58(4), Augus 2021, 1029-1056. See also Zell-
wege -Gu knech , C., Ge a, B., G ünewald, S., “Digi al Eu o, Mon-
e a y Objec s and P ice S abili y”, 7 Jou nal o Financial Regula ion
284, 2021; Nabilou, H., Cen al Bank Digi al Cu encies: P elimina y
Legal Obse a ions. Jou nal o Banking Regula ion, 2019; Phoebus
L. A hanassiou, Digi al Inno a ion in Financial Se ices: Legal Chal-
lenges and Regula o y Policy Issues (Alphen aan den Rijn: Kluwe
Law In e na ional B.V., 2018), Chap e 7.
97 See ECB, “P og ess on he in es iga ion phase o a digi al eu o—
second epo ”, a ailable a h ps:// www. ecb. eu opa. eu/ paym/ digi al_
eu o/ in es iga ion/ go e nance/ sha ed/ iles/ ecb. dego 221221_ P og
ess. en. pd ? 91e0 b8 8 cbd66 54d7e 6b071 a8 70 71 (accessed 14 Feb u-
a y 2023).
98 See Bech el, A. e al., “The Fu u e o Paymen s in a DLT-based
Eu opean Economy: A Roadmap”, Decembe 2020. See also ECB,
“Roles o he Eu osys em and in e media ies in he digi al eu o eco-
sys em”, 8 Oc obe 2022, a ailable a h ps:// www. ecb. eu opa. eu/
paym/ digi al_ eu o/ in es iga ion/ go e nance/ sha ed/ iles/ ecb. dego
221003_ busin essmo dels. en. pd ? b8a6 368c3 20639 3ab66 d63e 75bb3
a6 (accessed 14 Feb ua y 2023).
99 Di ec i e (EU) 2015/2366 o he Eu opean Pa liamen and o he
Council o 25 No embe 2015 on paymen se ices in he in e nal
ma ke , amending Di ec i es 2002/65/EC, 2009/110/EC and 2013/36/
EU and Regula ion (EU) No 1093/2010, and epealing Di ec i e
2007/64/EC (OJ L 337 23.12.2015, p. 35).
100 Di ec i e 2009/110/EC o he Eu opean Pa liamen and o he
Council o 16 Sep embe 2009 on he aking up, pu sui and p u-
den ial supe ision o he business o elec onic money ins i u ions
amending Di ec i es 2005/60/EC and 2006/48/EC and epealing
Di ec i e 2000/46/EC (OJ L 267 10.10.2009, p. 7).
101 See A icle 2(2)(c) MiCA.
102 See Maha i, R., Ha djono, T. and Pen land, A., “AML by design:
designing a cen al bank digi al cu ency o s i le money launde ing”,
Mi Science Policy Re iew, 2022, a ailable a : h ps:// scien cepol icy e
iew. o g/ wp- con e n / uploa ds/ secu epd s/ 2022/ 08/ MITSPR- 3- 19161
80030 20. pd
485
Cen al Bank Digi al Cu encies and inancial in eg i y: inding anew ade‑o be weenp i acy…
Au ho i y (AMLA); and (iii) inally, he Eu opean Cen al
Bank (ECB), as he mone a y au ho i y esponsible o he
issuance o he Digi al Eu o. To his s uc u e, also he Eu o-
pean Banking Au ho i y (EBA) should ha e a ole, gi en
i s manda e as a egula o o paymen se ices and elec-
onic money bu also as a di ec supe iso in he con ex o
ma ke s in c yp o-asse s. In addi ion, na ional au ho i ies—
ei he na ional da a p o ec ion au ho i ies, inancial supe -
iso s o FIUs—also bea esponsibili y o less signi ican
ins i u ions and na ional ansac ions, espec i ely.
This a he as a ay o public au ho i ies in e es ed in
he subjec s o ansac ions in ol ing he Digi al Eu o should
ha e hei manda es and oles made clea by he Digi al Eu o
amewo k, in o de o a oid an o e lap o unc ions o an
excessi e bu den o supe ised en i ies. Mo eo e , ensu ing
hei accoun abili y, especially conce ning digi al p i acy
and da a p o ec ion, is a majo challenge o be add essed by
he o hcoming Regula ion.
The Digi al Eu o and heEU AML/CFT amewo k
On 20 July 2021, he Eu opean Commission p esen ed a
legisla i e package aimed a s eng hening he EU’s AML/
CFT amewo k, comp ising he ollowing: (i) a p oposal
o a egula ion es ablishing he Au ho i y o An i-Money
Launde ing and Coun e ing he Financing o Te o ism
(AMLA)103; (ii) a p oposal o a egula ion on he p e en ion
o he use o he inancial sys em o he pu poses o money
launde ing and e o is inancing104; (iii) he VI Di ec i e
on AML/CFT, which is se o eplace he exis ing Di ec i e
(EU) 2015/849105; and (i ) an amendmen o he Regula ion
2015/847 on he in o ma ion accompanying he ans e s o
unds.106
Now ha he package eaches i s inal legisla i e i e and
is expec ed o come in o o ce by he end o 2025, s akehold-
e s a e p epa ing o adap o he new legisla ion. Among
o he changes, he new legisla ion o esees he inclusion
o decen alised au onomous o ganisa ions (DAOs), non-
inancial okens (NFTs) and DeFi pla o ms in he scope o
“obliged en i ies”, he e o e being equi ed o comply wi h
AML/CFT ules, as long as hey a e con olled (di ec ly o
indi ec ly) by iden i iable na u al o legal pe sons; enhanced
due diligence measu es when enabling c yp o- ansac ions
wo h mo e han 1000 EUR; cap paymen s in cash and
c yp o-asse s, whe e he cus ome canno be iden i ied; and
p ohibi ion o anonymous c yp o- and bank accoun s.
Acco ding o he “P o isional Ag eemen Resul ing
om In e ins i u ional Nego ia ions” o 5 Oc obe 2022
(2021/0241 (COD)), he co-legisla o s in ended o ex end
he scope o he new EU Regula ion on AML/CFT o
ans e s o c yp o-asse s. I also amends Di ec i e (EU)
2015/849 o subjec c yp o-asse se ice p o ide s (CASPs)
o he same AML/CFT equi emen s and AML/CFT supe i-
sion as c edi and inancial ins i u ions. These amendmen s
au oma ically ex end he scope o he exis ing Risk-Based
Supe ision Guidelines cu en ly applicable o c edi and
inancial ins i u ions unde ha Di ec i e. Following he
imminen publica ion o he new package, he Eu opean
Banking Au ho i y (EBA) has launched a Consul a ion Pape
on amending i s Guidelines on he Risk-Based Supe ision
unde A icle 48(10) o Di ec i e (EU) 20,157,849 (EBA/
CP/2023/05), in o de o include AML/CFT supe ision o
CASPs.
The link be ween AML/CFT and banking supe ision is
deeply oo ed in he de elopmen o bo h silos o egula ion.
Ensu ing p ope AML/CFT sa egua ds elies upon an e ec-
i e moni o ing o suspicious inancial ansac ions, which
ul ima ely depends on building and main aining solid go -
e nance s uc u es, in e nal con ol sys ems and calib a ed
isk managemen p ocedu es—elemen s essen ially pe ain-
ing o p uden ial supe ision.
While he ask o in es iga e b eaches on AML/CFT
p ocedu es and o ca y ou sanc ioning p ocedu es all in
he hands o FIUs, he ECB shall also ac upon AML/CFT
issues ha may impac on he soundness o he in e media -
ies’ in e nal s uc u es. B eaches o AML/CFT p o isions
can, he e o e, jus i y he wi hd awal o a c edi ins i u ion’s
banking license. No by chance, he p oposal o a egula ion
es ablishing he AMLA o esees ha i will “be en us ed o
de elop guidelines in coo dina ion wi h he ECB, he Eu o-
pean Supe iso y Au ho i ies (…) in coope a ion be ween
all compe en au ho i ies”.
I also s a es in Reci al (59) ha “To imp o e c oss-sec o-
al supe ision and a be e coope a ion be ween p uden ial
and AML/CFT supe iso s he Au ho i y should also es ab-
lish coope a i e ela ions wi h he au ho i ies compe en o
p uden ial supe ision o inancial sec o obliged en i ies,
including he Eu opean Cen al Bank wi h ega d o ma e s
ela ing o he asks con e ed on i by Council Regula ion
(EU) No 1024/2013 (…)”.
Such jux aposi ion o compe ences and collabo a i e
e o s na u ally poses issues o he p ope dema ca ion
o powe s and esponsibili ies o such EU Ins i u ions and
Agencies. Theo e ically, cen al banks (such as he ECB and
NCBs), depending on hei ela ions wi h end use s in he
Digi al Eu o’s design, could be bound o he same legisla ion
applicable o o he ma ke pa icipan s wi h espec o AML.
103 h ps:// eu - lex. eu opa. eu/ legal- con e n / EN/ TXT/? u i= CELEX:
52021 PC0421.
104 h ps:// eu - lex. eu opa. eu/ legal- con e n / EN/ TXT/? u i= CELEX%
3A520 21PC0 420.
105 h ps:// eu - lex. eu opa. eu/ legal- con e n / EN/ TXT/? u i= CELEX%
3A520 21PC0 420.
106 h ps:// eu - lex. eu opa. eu/ legal- con e n / EN/ TXT/? u i= CELEX%
3A520 21PC0 422.
486 G.Soana, T.de A uda
This would c ea e a esponsibili y o hese public ins i u-
ions ega ding AML/CFT compliance, au hen ica ion, aud
p e en ion, e c. E en hough heo e ically possible, i seems
unlikely ha his ype o bu den will be imposed on public
EU ins i u ions, as he Digi al Eu o’s design is indi ec and
decen alised and will p obably keep such obliga ions in he
hands o in e media ies. None heless, he ole and accoun -
abili y o he ECB and NCBs o inancial in eg i y and da a
p o ec ion pu poses, especially in coo dina ion wi h o he
public s akeholde s and p i a e playe s, shall be ca e ully
designed.
The ECB has al eady exp essed ha he Digi al Eu o
would comply wi h AML equi emen s applicable o he
inancial sys em, e en hough cen al bank liabili ies would
no be subjec o egula ion and o e sigh .107 A p ecise
unde s anding o how cu en AML/CFT legisla ion will
apply o he Digi al Eu o, howe e , equi es a conc e e
analysis o he p oposed Digi al Eu o Regula ion is-à- is
he new EU AML/CFT package and o he pieces o exis ing
laws and egula ions, including he MiCA Regula ion, as o
ensu e a cohe en and consis en amewo k h oughou EU
legisla ion applicable o digi al inance.
Conclusions
CBDCs ep esen he nex s ep in he e olu ion o he cu -
ency. In a pe asi ely digi ised inancial en i onmen , i
was jus a ma e o ime be o e analogical ia cu encies
we e subs i u ed, o a leas complemen ed, by a digi al ia
cu ency. Gi en he ellu ic each o such an inno a ion, he
in oduc ion o a CBDC aises a ious undamen al con-
ce ns spanning om inancial s abili y o bank uns.
The p esen pape has ocused on one o such conce ns:
he ade-o be ween inancial in eg i y and moni o ing,
which ouches upon he delica e balance be ween inc eas-
ing secu i y and p ese ing eedom. The digi alisa ion
and uni ica ion o a cu ency’s inancial ledge would
deeply impac such a ade-o . A CBDC would p o ide
an unp eceden ed da a sou ce o he moni o ing o e ail
ansac ions, hence ex ending he a chi ec u al po en ial
o moni o ing. Fu he mo e, he di ec connec ion such a
digi al cu ency would c ea e be ween cen al banks and
he sou ce o he in o ma ion (i.e. he inancial ledge )
would disin e media e he ela ion be ween S a e au ho i-
ies and inancial lows. While public moni o ing would
s ill be limi ed by legal cons ain s, such an a chi ec u al
modi ica ion c ea es a new po en ial o moni o ing ha
should be explici ly acknowledged and add essed by he
egula o , including o he pu poses o iden i ying and
s uc u ing accoun abili y mechanisms o public ac o s.
In such a con ex , he design phase o CBDCs is o
pa icula impo ance, as i allows ju isdic ions o b oadly
discuss how o bes s uc u e his new means o paymen
in iew o he p inciples and alues sa egua ded by hei
legal sys em. The conc e e impac o a CBDC on he inan-
cial in eg i y in as uc u e will be, hus, ul ima ely linked
o he speci ic design choices adop ed by each ju isdic ion.
In his sense, he ECB’s p oposals on he Digi al Eu o
seem o lack he necessa y awa eness ega ding he moni-
o ing e ec s connec ed wi h he in oduc ion o an EU
CBDC. While p i acy is clea ly on he highes conce ns o
Eu opean s akeholde s, he la es p oposals by he ECB do
no clea ly acknowledge he nega i e e ec s ha enhanced
moni o ing a Digi al Eu o would allow and do no o e
con incing solu ions as o he balancing o holding lim-
i s, anonymi y and AML/CFT conce ns.108 In con as , he
ECB seems o ha e emb aced a he o ic ha a Digi al Eu o
would be good o p i acy as i would ans e he con ol
o e da a om co po a ions o he cen al bank. Gi en
he ellu ic shi a CBDC would cause, his does no seem
enough. On a legisla i e sphe e, i is s ill wo ying unclea
how he Digi al Eu o Regula ion will in e sec wi h exis -
ing laws and egula ions go e ning digi al inance and
AML/CFT in he Union. Finally, on an ins i u ional le el,
he o e lapping o a my iad o di e en public au ho i ies
and manda es which could, a leas po en ially, be in ol ed
in he Digi al Eu o ini ia i e, aises signi ican doub s as
o he oles, du ies and esponsibili ies pe aining o each
s akeholde . I is now up o he co-legisla o s, as pa o
he nego ia ions ega ding a CBDC’s Regula ion, o unde -
s and how and whe e o d aw he lines.
Funding Open access unding p o ided by Luiss Uni e si y wi hin he
CRUI-CARE Ag eemen .
Decla a ions
Con lic o in e es On behal o all au ho s, he co esponding au-
ho s a es ha he e is no con lic o in e es .
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Publishe 's No e Sp inge Na u e emains neu al wi h ega d o
ju isdic ional claims in published maps and ins i u ional a ilia ions.
107 ECB, Repo on digi al Eu o, ci ., Requi emen 10.
108 On he speci ic issue su ounding holding limi s, see M. Wa en,
“Le he Digi al Eu o Ci cula e: In oducing a Re ail C.B.D.C. in he
Eu ozone Wi h Unlimi ed Holdings by Use s”, Uni e si y o Bologna
Law Re iew, Vol. 8, Issue 1, 2023.