Nolens said she believes this tension between data privacy and financial compliance will be at the forefront of discussions on central bank digital currency because a lot of regions want CBDC; yet, they’re also leaning toward privacy.

“So now, data privacy actually in that sense, needs to be distinguished from anonymity. Let’s say data privacy regulations and ordinances, they don’t protect anonymity; they protect privacy which means they protect the giving out of your personal data so there probably is a balance that can be achieved there between financial compliance and data privacy. But let’s be clear,” said Nolens, “it’s not anonymity.”

About cryptocurrency and data privacy, she said: “Every single regulator that has actually allowed cryptocurrency or crypto asset trading has required that a crypto asset trading be subject to the AML ordinance of that jurisdiction. That means that if you are in crypto exchange, you have to do AML and Know Your Customer (KYC) processes and also sanctions processes. When you do that, the anonymity stops there.”

KYC processes were developed for financial institutions such as banks to protect themselves against various forms of criminal activities, serving as a foundation for financial compliance and risk management. These financial crimes include money laundering, fraud, corruption and financing of terrorist activities. KYC processes include steps for establishing a customer’s identity, generating information on the nature of the customer’s activities to determine the legitimacy of the source of funds and assessing money laundering risks in connection with the customer.

For Nolens, cryptocurrency is significantly more traceable than most other payment methods will ever be because of the public addresses.