On 17 December 2019, the European Central Bank (ECB) published its latest in focus paper which explores anonymity in central bank digital currencies. The paper discusses a proof of concept for anonymity in digital cash (referred to as “central bank digital currency”) that has been developed by the European System of Central Banks.

The main thing that the prototype shows is that, in a simplified environment typical of a proof of concept, distributed ledger technology can be used to balance an individual’s right to privacy with the public’s interest in the enforcement of anti-money laundering / countering the financing of terrorism (AML/CFT) regulations. It provides a digitalisation solution for AML/CFT compliance procedures whereby a user’s identity and transaction history are hidden from the central bank and intermediaries other than that chosen by the user.