The European Central Bank has build a proof-of-concept for anonymous transactions using a central bank digital currency. The system would use so-called anonymity vouchers, which would only be available for low-value transactions. The ECB underlines that more work is needed before such a system would be implemented.
The European Central Bank revealed their plans for these anonymous transactions in a report on Tuesday. The anonymity vouchers would allow European citizens to use digital money without revealing their identity, similar in the way a cash transaction works. The idea is that every users receives a set amount of vouchers per month.
The initiative from the European Central Bank is build on the distributed ledger technology (DLT) platform Corda. It’s based on older proof-of-concept based systems. The central bank, two intermediaries and an anti-money laundering authority would oversee the Proof-of-Concept network by running a node. The intermediaries would be the direct relationship with the users, as they keep track of transactions and keep records of the ledger.
Room for improvement
With only four nodes per country there’s quite a risk when one or more nodes go down. In addition the validation of a transaction would need more confidentiality, according to the ECB itself. In the currently proposed system an intermediary would need to check all past transactions of a certain digital currency. This is troublesome, and the ECB wants to tackle this problem by cutting the blockchain into pieces and reduce the amount of information made visible to unrelated parties.
Another problem hides in the accessibility of the blockchain. Each intermediary takes responsibility to a certain percentage of the population. It that node is down for whatever reason, users might not have access to their money. The ECB can improve this by giving users the option to store their keys in their own private device, such as a mobile phone.
Uncertainty surrounding digital euro
Within the European Union there’s quite a strong call for a digital version of the euro. However, there’s also considerable resistance. Last week newly appointed ECB president Christine Lagarde stated that the ECB wants to stay ‘ahead of the curve’ in its efforts to issue a digital currency. Lagarde believes that stablecoins are a serious threat to the position of the euro.
My personal conviction is that given the developments we are seeing, not so much in the Bitcoin segment, but in the stable coins projects, and we only know of one at the moment, but there are others being explored and under way at the moment, we had better be ahead of the curve if that happens. Because there is clearly a demand out there that we have to respond to.Christine Lagarde – ECB Governing Council Press Conference (12/12/2019)
Not everybody agrees with this progressive stance towards digital money. The former ECB president spoke last month about cryptocurrencies, and said he was ‘strongly against bitcoin’, because the currency ‘is not real’.
Also published on Medium.