December 14, 2020

Central Bank Digital Currencies: The Threat From Money Launderers and How to Stop Them

By Yaya J. Fanusie

Digital currency appears to be the future of money. Efforts to merge monetary policy and instruments with computer-science-driven financial technology are gaining momentum globally. Central banks in large and small economies alike are proposing to revamp their monetary systems by deploying new types of digital tokens that would be managed by a single authority and designed for wide-scale retail use. Unlike independent cryptocurrencies such as Bitcoin, central bank digital currency (CBDC) has a high chance of national adoption precisely because it would be issued by a nation’s monetary authority, with its value backed by government fiat and its use encouraged by public policy.

Digital currency appears to be the future of money.

Any large economy that builds and deploys a CBDC is likely to encounter new financial crime risks. Compared to physical cash, CBDCs will in certain respects make it easier for regulators to fight money laundering, and key technical aspects of CBDCs will hinder some traditional illicit financial techniques. But CBDCs will nevertheless be a tempting target for bad actors, both state and non-state, who will adapt their methods accordingly. In particular, the unique technical features that CBDCs will add to fiat money—such as wallet programmability and microtransactions (the ability to transact at volumes below a penny)—will enable more intricate money laundering schemes.

Read the full article in Lawfare.

  • Reports
    • January 14, 2021
    Sanctions by the Numbers

    Sanctions designations remained high in 2020, with 777 designations compared to 785 in 2019....

    By Sam Dorshimer & ​Francis Shin

  • Reports
    • December 17, 2020
    America’s Use of Coercive Economic Statecraft

    Policymakers will continue to intensively use a growing array of coercive economic tools, including tariffs, sanctions, trade controls, and investment restrictions....

    By Elizabeth Rosenberg, Peter Harrell, Paula J. Dobriansky & Adam Szubin

  • Commentary
    • December 16, 2020
    Sharper: 2020

    2020 featured an ever-evolving series of national security challenges....

    By Sam Dorshimer, Nathalie Grogan, Emily Jin, Chris Estep & Cole Stevens

  • Commentary
    • The National Interest
    • December 15, 2020
    How Harsh U.S. Sanctions Are Advancing Chinese and Russian Interests Abroad

    Harsh U.S. sanctions have pushed Venezuela and Iran further into the arms of traditional U.S. adversaries....

    By Jason Bartlett & Emily Jin

View All Reports View All Articles & Multimedia