By George Ward
Introducing Project Tourbillon
The clamor for more consumer privacy in digital asset transactions and the need to counter illegal financial activities has birthed a central bank digital currency (CBDC) initiative. Project Tourbillon is a ground-breaking prototype developed by the Bank for International Settlement (BIS) Innovation Hub to address user anonymity in digital asset transactions, especially CBDC.
In its final published report, the BIS explains the aims of Project Tourbillon, especially its seamless integration into existing payment platforms. The report describes the creation of eCash 1.0 and eCash 2.0 as prototypes that could provide absolute payer anonymity and robust security features for CBDC transactions.
Using the designs of cryptographer David Chaum, the prototypes were created with the concepts of privacy, security, and scalability in mind. The report highlights the viability of implementing a CBDC that preserves trade anonymity while fighting unlawful transactions.
Addressing Complex Trade-Offs
In addition, the prototypes address the complex trade-offs between cyber resilience, scalability, and user privacy, all of which are essential features of CBDCs. The project reconciles these trade-offs by combining tried-and-tested technologies like blind signatures and mix networks with the most recent cryptography and CBDC design research from David Chaum and Thomas Moser.
Project Tourbillon proves that CBDCs can provide a secure and efficient digital payment infrastructure that protects user privacy while combating illegal transactions. The project’s prototypes apply to wholesale and retail CBDC systems.
The BIS platform intends to continue its research and development efforts in this area to promote CBDC adoption globally.
Will Project Tourbillon Prevent Money Laundering?
According to the report, all CBDC users must go through a Know Your Customer procedure at a commercial bank before using the CBDC. This process aims to ensure compliance with regulatory requirements such as counter-terrorism financing, anti-money laundering, and tax evasion laws.
However, this dependence on Know Your Customer (KYC) procedures at commercial banks before using the CBDC may hinder financial inclusion for many individuals. This is mainly for those who need access to banking services or identification documents.
The report also emphasizes the ease with which Tourbillon’s payment process can be integrated into existing payment infrastructure, thanks to proof-of-stake protocols, QR codes, and account connections between customers, merchants, and banks. This integration can streamline and improve payment processes.
On the other hand, total anonymity for users may raise unease among regulatory bodies as it may hamper their capacity to monitor and enforce compliance with anti-money laundering and counter-terrorism financing laws. As a result, it is critical to strike a balance between privacy and security while adhering to regulatory requirements.
While CBDCs have the potential to transform the payment industry, it is critical to address the issues of financial inclusion, privacy, and security. CBDCs are a powerful tool for promoting financial inclusion and economic growth while ensuring regulatory compliance.
China’s e-CNY Gets A Boost
In a related development, Standard Chartered Bank has announced that its China division, in partnership with City Bank Clearing Services Co, will provide digital yuan exchange services. It is a noble development because Standard Chartered is one of the first foreign banks to engage directly with China’s CBDC initiative.
The People’s Bank of China is the issuer of the digital yuan, a digital version of China’s fiat currency, the renminbi (RMB). The collaboration will give Chinese customers access to a digital interconnection platform and a comprehensive suite of services, allowing them to exchange and trade e-CNY via their bank accounts.
The move is expected to increase the use of digital currencies in China and its special administrative regions. Zhang Xiaolei, Vice Chairman of the bank, emphasized the significance of the expansion for the broader adoption of cryptocurrency.
It is worth noting that the bank has actively explored opportunities in the digital currency space and participated in the e-CNY trials over the past three years. Standard Chartered is a British multinational bank that expanded its retail trading and exchange services into China to increase the adoption of the digital yuan.