Top Chinese Law Firm Analyzes Digital Yuan AML Challenges
China’s JunHe Law Firm has released a report addressing the anti-money laundering (AML) challenges posed by digital yuan.
JunHe’s Partner Chen Xin recently co-authored and published The Anti-Money Laundering Challenges and Opportunities of the Digital Yuan, an article that analyzes China’s central bank digital currency (CBDC)’s AML compliance.
As a digitalized legal tender directly issued by the People’s Bank of China (PBOC), the digital yuan is poised to innovate payment systems but also faces unique vulnerabilities that could be exploited for illicit activities.
A major concern was the potential for the digital yuan to be used anonymously. While providing user privacy, the digital currency’s features could potentially make it easier for bad actors to mask illegal transactions.
“An anonymous wallet allows users to conduct transactions without revealing their identity information, designed to provide a higher degree of privacy protection,” the article reads.
The report also highlighted the speed and cross-border nature of transactions with the digital yuan, which could complicate traditional AML monitoring practices. Transactions with e-CNY are completed almost instantaneously, which reduces the window for regulatory intervention.
In addition, the integration of the digital yuan into the global financial system could raise concerns about its compatibility with international AML standards.
As the currency becomes more widely used internationally, ensuring that transactions comply with a diverse range of regulatory environments becomes increasingly challenging.
The firm suggested integrating advanced technologies such as artificial intelligence and blockchain to improve real-time monitoring of transactions. This technological
