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.
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