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Top Chinese law firm examines anti-money laundering challenges in digital yuan

The law firm is focusing on identifying a gap in the current legislation and proposing legal and technological solutions that can help effectively monitor and regulate digital currency.

Date: 2024-04-30 Author: Marek Stiller
Top Chinese law firm examines anti-money laundering challenges in digital yuan

Chinese law firm JunHe has published a report on the anti-money laundering (AML) challenges posed by the digital yuan.

Partner at JunHe, Chen Xin, co-authored and published an article titled “AML Challenges and Opportunities” – an article analyzing the compliance of China’s central bank digital currency (CBDC) with AML.

As a digital legal tender issued directly by the People’s Bank of China (PBOC), the digital yuan can innovate payment systems, but it also has unique security vulnerabilities that can be exploited for illicit activities.

A major concern was the potential for anonymous use of the digital yuan. While ensuring user privacy, the digital currency’s features could potentially make it easier for bad actors to mask illegal transactions.

“The anonymous wallet allows users to conduct transactions without revealing their identity information and is expected to provide a higher degree of privacy protection,” the article reads.

The report also highlights the speed and cross-border nature of transactions using the digital yuan, which can complicate traditional AML monitoring practices. Transactions using e-CNY are processed almost instantly, reducing the time for regulators to intervene.

In addition, the integration of the digital yuan into the global financial system may raise concerns about its compliance with international AML standards. As the currency becomes more widely used internationally, ensuring that transactions comply with a variety of regulatory environments becomes more challenging.

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Suggestions, solutions and opportunities

The company suggested integrating advanced technologies such as artificial intelligence and blockchain to improve real-time monitoring of transactions. This technological enhancement would increase the ability to quickly identify and respond to suspicious activity.

Additionally, the report called for improved identity verification processes, especially for anonymous wallets.

By implementing strict transaction limits and ensuring rigorous due diligence, a balance can be struck between preserving user privacy and ensuring transaction transparency.

On the international front, the report stresses the importance of bringing e-CNY in line with global AML standards.

“There is reason to believe that the implementation and improvement of AML guidelines in the digital yuan will ensure a healthy, transparent and secure financial environment for financial institutions, businesses and the public,” the article reads.

“As the digital yuan continues to be promoted and utilized, we look forward to a more efficient, convenient and secure future for digital payments.” – the company concluded.

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Marek Stiller
Marek Stiller
Founder of the "Cryptocurrency for Beginners" channel on YouTube. He collaborates with Łukasz to form the Arena Trading group, while at the same time being passionate about blockchain technology. His knowledge and experience in the cryptocurrency industry help beginner investors better understand this dynamic market.
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