Privacy and Compliance Design Options in Offline Central Bank Digital Currencies

Author ORCID Identifier

Poonam Puri: 0000-0003-3233-5019

Document Type

Article

Publication Date

10-2025

Source Publication

IEEE Transactions on Network and Service Management, vol. 22, no. 5, pp. 3748-3763, Oct. 2025, doi: 10.1109/TNSM.2025.3575367.

Keywords

Privacy; Security; Online banking; Random access memory; Hardware; Microprocessors; Memory management; User experience; Training; Software; Anonymity; CBDC; compliance by design; offline payments; privacy; secure computation; secure hardware

Abstract

Many central banks are researching and piloting digital versions of fiat money, specifically retail central bank digital currencies (CBDCs). Core to many discussions revolving around these systems’ design is the ability to perform transactions even without network connectivity. While this approach is generally believed to provide additional degrees of freedom for user privacy, the lack of direct involvement of third parties in these offline transfers also interferes with key regulatory requirements that need to be accommodated in the financial space. This paper presents a compliance-by-design approach to evaluate technologies that can balance privacy with anti-money laundering and counter-terrorism financing (AML/CFT) measures. It classifies privacy design options and corresponding technical building blocks for offline CBDCs, along with their impact on AML/CFT measures, and outlines commonalities and differences between offline and online solutions. As such, it provides a conceptual framework for further techno-legal assessments and implementations.

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