Legality of Chaumian e-cash
<p>In the 1980s, <a href="https://en.wikipedia.org/wiki/David_Chaum" rel="nofollow noreferrer">David Chaum</a>, a cryptographer, came up with micropayment system that would achieve cryptographic transaction privacy. Later, in the 1990s, he attempted to build this system, but it did not take off.</p>
<p>Today, would it be legal to create something like PayPal but that does not and cannot record transactions? Or would that be a violation of KYC or AML laws?</p>

<p>Chaum's system takes a centralised approach and his papers refer to the central entity (that takes deposits and provides cash) as a 'bank'.</p>
<p>I don't know if it would be considered a bank in every or any jurisdiction. PayPal wasn't considered a bank by some jurisdictions. In 2007 Luxembourg gave PayPal Europe a banking licence and it then became subject to banking regulations.</p>
<p>Whatever it is, this central entity is likely to be subject to some financial <em>regulations depending on the jurisdiction</em> - including Know Your Customer -type rules.</p>
<p>In the UK, Chaum's 'bank' seems to be an electronic money issuer (EMI) so subject to The Electronic Money Regulations.</p>
<p>All EMIs must comply with legal requirements to detect and deter financial crime including money laundering and financing of terrorism. These include Customer Due Diligence which includes customer identity verification and monitoring (customer-entity) transactions.</p>
<p>As I recall, UK credit or financial institutions have not been permitted to set up anonymous accounts since the early 2000s (if not earlier).</p>
<p>So it seems to me Chaum's system would be legal in many jurisdictions but the customers (account-holders) must be known to the central entity and their incomings and outgoings recorded by the central entity.</p>

privacy finance currency cryptocurrency money-laundering