Authored By: Motahhareh Abedinisaniji
Introduction
The long-term growth of global trade has made it clear that cross-border payment systems have inherent systemic flaws. International remittance services routinely charge high fees and take several days to deliver funds. As a result, the cross-border payments system is often criticized for being expensive, slow, non-transparent, and not sufficiently inclusive. In 2020, at the request of G20 Ministers of Finance, the Financial Stability Board issued a roadmap that set out the steps necessary to address the mentioned issues of cross-border payments. Among the possible solutions to this problem, one gained the most attention: if central banks were to create digital versions of physical cash (i.e., currencies) that are functionally equivalent to physical cash but are represented in the form of digits or codes, they could potentially be interconnected via national payment systems. This interconnection would allow for almost instantaneous settlement of cross-border payments without having to wait until the end of a business day and without incurring additional costs associated with currency exchange or third-party transactions. Without coordinated legal and technical standards, however, such interconnection risks new problems of its own, including inconsistent oversight and reduced transparency across national banking systems.
A 2023 BIS survey found that roughly 94% of responding central banks were actively researching CBDCs, with 81% developing proofs of concept and about 33% running pilot programs. Among these, China’s e-CNY and the EU’s proposed digital euro are the most advanced, each reflecting a different philosophy toward state access to financial data. A CBDC is, by design, traceable by the central bank; the legal question is whether such a system can deliver efficiency and cross-border interoperability while still protecting citizens’ financial privacy This article examines how China’s and the EU’s legal frameworks resolve, or fail to resolve, this tension. It proceeds in four parts: e-CNY’s legal architecture, the digital euro’s privacy safeguards under EU law, a comparative assessment of both models, and the unresolved jurisdictional challenges in cross-border CBDC use.
The Legal Architecture of China’s e-CNY: Controllable Anonymity as Regulatory Compromise
China’s central bank, the People’s Bank of China (PBOC), has structured the e-CNY’s privacy framework around a principle it calls “controllable anonymity,” a term first articulated by Mu Changchun, Director-General of the PBOC’s Digital Currency Institute. The operative slogan behind this principle is “small amounts are anonymous, big amounts are traceable,” meaning the degree of anonymity afforded to a user depends on transaction size. In practice, this is implemented through a tiered wallet system: fully verified, account-linked wallets carry the highest transaction ceilings, simplified wallets tied only to a mobile number offer reduced limits with easier onboarding, and hardware wallets enable limited offline payments. The legal basis for this architecture rests primarily on China’s Personal Information Protection Law, with the PBOC issuing implementing rules and technical standards under that statute.
From a doctrinal standpoint, “controllable anonymity” is best understood not as a privacy right held by the individual, but as a discretionary administrative tool retained by the state. The PBOC itself frames the policy explicitly as a balance between two competing state interests, instead of between the state and the citizen: enabling legitimate anonymous transactions while simultaneously preventing money laundering, terrorist financing, and tax evasion. This framing matters legally because it places the central bank, as opposed to an independent data protection authority, as the sole arbiter of where that balance is struck. Although the PBOC has described internal safeguards, such as a “firewall” for e CNY-related information, designated personnel to manage data, and a tiered authorization system with internal audits, these mechanisms function as internal compliance procedures, not as independently enforceable user rights of the kind found in jurisdictions with dedicated privacy regulators.
Critics of this model argue that the anonymity it confers is illusory at the systemic level. Even where individual counterparties to a transaction cannot identify one another, the PBOC itself retains full visibility into every transaction processed through the system. Commentators have further raised concern that the e-CNY’s programmability could, in principle, be used to restrict payments to or from disfavored entities, a capability with no clear precedent in cash-based monetary systems and no independent judicial check described in the current legal framework. China is also moving to formalize the e-CNY’s legal status further: draft revisions to the PBOC Law would grant the digital renminbi explicit legal-tender status, clarifying acceptance obligations in both public and private settings.
Taken together, the e-CNY’s legal architecture prioritizes monetary and security oversight, with privacy operating as a calibrated exception administered by the issuing authority itself, rather than as an independently guaranteed legal entitlement.
III. The Legal Architecture of the Digital Euro: Privacy by Design Under EU Law The European Union’s approach to CBDC privacy begins from a fundamentally different legal starting point. In June 2023, the European Commission published a formal proposal for a regulation establishing the digital euro, specifying that online payments should carry a level of privacy comparable to today’s electronic payments, while offline payments should approach the privacy of cash. Unlike the e-CNY, where the central bank itself administers the anonymity threshold, the digital euro proposal is designed to operate within, and be constrained by, a pre-existing and independently enforceable data protection regime.
Structurally, the European Central Bank (ECB) has sought to minimize its own access to personal data instead of retaining it for internal calibration. Under the current design, end users are onboarded through a payment service provider responsible for anti-money laundering and know-your-customer checks, after which transactions are forwarded to the settlement infrastructure using pseudonymous identifiers, such that the ECB cannot itself connect a given transaction to a specific individual. The proposal further states that the ECB should not, as a matter of principle, store or process users’ personal data at all. This is a structural privacy commitment embedded in the legal text itself, as opposed to an internal administrative safeguard subject to revision by the issuing authority.
Critically, the digital euro framework does not exist in legal isolation. As issuer and infrastructure provider, the ECB is subject to supervision by independent data protection authorities, who monitor its compliance with the EU Data Protection Regulation and the General Data Protection Regulation. This external, judicially enforceable oversight has no direct counterpart in the e-CNY framework, where compliance is assessed internally by the PBOC under its own implementing rules. The European Data Protection Board and European Data Protection Supervisor, in their formal joint opinion on the proposal, welcomed the commitment to high privacy standards and the inclusion of an offline payment mode to reduce personal data processing, while also pressing for the pseudonymization of transaction data to be made a binding operative requirement instead of remaining a stated intention, and criticizing the lack of foreseeability surrounding the ECB’s proposed fraud detection and prevention mechanism.
This last point exposes a genuine tension within the EU’s own model. Fraud prevention requires some capacity to flag suspicious transaction patterns, which is difficult to reconcile fully with a system built around pseudonymization and data minimization. The EDPB and EDPS specifically flagged the absence of clear legal boundaries on the tasks the ECB versus payment service providers would perform under this mechanism as a significant gap requiring legislative clarification.
Even so, the structural distinction from China’s model remains significant: in the EU framework, privacy is treated as a default legal entitlement from which exceptions must be specifically justified and externally supervised, whereas in China’s framework, anonymity is treated as a calibrated administrative concession that the issuing authority itself controls and may adjust.
A Comparative Assessment: Convergent Goals, Divergent Legal Logics Placed side by side, the e-CNY and the digital euro pursue a broadly similar technical objective — preserving some measure of transactional anonymity within a system that is, by design, fully traceable to its issuer — through structurally opposite legal logics. The first point of divergence concerns where the anonymity threshold sits and who controls it. China’s tiered-wallet architecture allows the PBOC to recalibrate the boundary between anonymous and traceable transactions as an incident of its own regulatory discretion. The EU’s pseudonymization model instead fixes that boundary as a legal default within the enabling Regulation itself, amendable only through the ordinary EU legislative procedure and subject to review by the EDPB and EDPS. This is a difference of constitutional architecture, not merely of design philosophy: China concentrates the roles of issuer, data controller, and privacy arbiter within a single institution, while the EU deliberately separates these functions across the ECB, payment service providers, and independent supervisory authorities, so that no single actor can unilaterally redraw the privacy guarantee.
The second point of divergence concerns programmability, which functions as a proxy for how far state control can reach into individual transactions. Where commentators have raised concerns that e-CNY’s programmability could in principle be used to restrict payments to disfavored recipients, ECB officials have publicly and repeatedly rejected the prospect of the digital euro being “programmable money,” committing instead only to optional “conditional payments” agreed between a user and their bank. The European Commission’s proposal goes further, stipulating that neither the ECB nor public authorities would be able to impose built-in restrictions on how a digital euro may be used. This is a legally significant distinction: it converts a policy assurance into a statutory constraint on the issuer itself.
Yet the comparison should not be read as a simple contrast between an authoritarian and a rights-protective model. Both systems still concentrate some irreducible power in the issuing central bank — China, through direct visibility into every transaction, the EU through the ECB’s role in fraud-detection mechanisms whose boundaries remain, as discussed in Part II, legally undefined. The difference lies not in the absence of state capacity to observe, but in whether that capacity is exercised inside an externally accountable legal structure or an internally administered one.
The Cross-Border Convergence Problem: A Legal Governance Vacuum
Despite their different approaches to privacy, both the e-CNY and the proposed digital euro face a common legal obstacle when used beyond national borders: the absence of a harmonized framework governing cross-border CBDC transactions. While technical interoperability is increasingly achievable, legal interoperability remains underdeveloped. Questions concerning applicable law, jurisdiction, regulatory oversight, and cross-border data governance have yet to be resolved through internationally accepted standards.
Jurisdictional uncertainty becomes particularly evident where a transaction involves multiple legal systems. A payment initiated by an EU resident using the digital euro and settled through a foreign CBDC infrastructure may simultaneously engage the monetary laws, data protection rules, and anti-money laundering obligations of several jurisdictions. Existing private international law provides only limited guidance because CBDCs combine characteristics of sovereign currency, digital payment systems, and state-controlled financial infrastructure.
The divergence between the Chinese and European models further complicates cross border cooperation. The EU framework treats financial privacy as a legally protected right subject to independent oversight, whereas China’s model grants broader supervisory authority to the issuing central bank. These differences may create tensions regarding cross-border data access, regulatory cooperation, and mutual recognition of compliance standards, particularly in investigations involving financial crime or sanctions enforcement.
Accordingly, the long-term success of cross-border CBDCs will depend not only on technological innovation but also on international legal coordination. Developing common principles for jurisdiction, data governance, supervisory cooperation, and dispute resolution will be essential to ensuring that greater payment efficiency does not come at the expense of legal certainty or the protection of fundamental rights.
VII. Conclusion
This article has examined how China’s e-CNY and the EU’s digital euro resolve the tension between payment efficiency and financial privacy through fundamentally different legal architectures: the former treating anonymity as a discretionary concession administered by the issuing central bank, the latter treating privacy as a default legal entitlement enforced by institutions independent of the issuer. Both models achieve a workable domestic compromise. Neither model, however, was designed with the other in mind, and neither domestic legal framework — nor, at present, international private law — offers a clear answer to which rules should govern a transaction that touches both systems at once.
The practical implication is that CBDC interoperability is currently outpacing the development of CBDC law. Platforms such as mBridge demonstrate that central banks can effectively address the technical issue of cross-border settlement before international law resolves the accompanying legal concerns, and that, in the interim, private governance rulebooks — negotiated between issuing institutions rather than democratically legislated — are quietly assuming the functions that public international law has yet to fulfill.
Three reforms would narrow this gap. First, the HCCH’s ongoing work on the private international law aspects of CBDCs should be prioritized toward a binding instrument, rather than a purely advisory one, specifically addressing choice of law and data protection conflicts in cross-border CBDC transfers. Second, bilateral or multilateral CBDC interoperability agreements should be required to specify, as a matter of public record, which jurisdiction’s privacy standard applies to shared transaction data, rather than leaving this to platform-level technical rulebooks. Third, independent oversight — comparable to the EDPB/EDPS role in the EU model — should be built into any cross border CBDC bridge from the outset, rather than retrofitted after a dispute arises.
Until such reforms materialize, the privacy paradox identified in this article will not be resolved so much as displaced: from a question each central bank can answer within its own legal order, to a question neither can answer once their currencies begin to speak to one another.
Legislation
European Union
Proposal for a Regulation of the European Parliament and of the Council on the Establishment of the Digital Euro, COM(2023) 369 final.
Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the Protection of Natural Persons with Regard to the Processing of Personal Data and on the Free Movement of Such Data (General Data Protection Regulation) [2016] OJ L 119/1.
People’s Republic of China
Cybersecurity Law of the People’s Republic of China (中华人民共和国网络安全法) (promulgated 7 November 2016, effective 1 June 2017).
Personal Information Protection Law of the People’s Republic of China (中华人民共和国个 人信息保护法) (promulgated 20 August 2021, effective 1 November 2021).
Official Government and Central Bank Documents
Bank of England, Central Bank Digital Currency: Opportunities, Challenges and Design (2020) https://www.bankofengland.co.uk/-/media/boe/files/paper/2020/central-bank-digital currency-opportunities-challenges-and-design.pdf accessed 2 July 2026.
European Central Bank, Exploring Anonymity in Central Bank Digital Currencies (2019) https://www.ecb.europa.eu/paym/intro/publications/pdf/ecb.mipinfocus191217.en.pdf accessed 2 July 2026.
European Central Bank, Progress on the Preparation Phase of a Digital Euro – First Progress Report (2024) https://www.ecb.europa.eu/euro/digital_euro/progress/html/ecb.deprp202406.en.html accessed 2 July 2026.
European Data Protection Board and European Data Protection Supervisor, Joint Opinion 01/2023 on the Proposal for a Regulation on the Establishment of the Digital Euro (2023).
People’s Bank of China, Progress of Research & Development of E-CNY in China (July 2021) https://www.pbc.gov.cn/en/3935690/3935759/4696666/2022110110364344083.pdf accessed 2 July 2026.
International Organisations Documents
Bank for International Settlements, Central Bank Digital Currencies (Committee on Payments and Market Infrastructures Papers No 174, 2018) https://www.bis.org/cpmi/publ/d174.pdf accessed 2 July 2026.
Bank for International Settlements, CBDCs Beyond Borders (2021) https://www.bis.org/publ/othp47.htm accessed 2 July 2026.
Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riksbank, Swiss National Bank, Bank of England, Board of Governors of the Federal Reserve System and Bank for International Settlements, Central Bank Digital Currencies: Foundational Principles and Core Features (Bank for International Settlements 2020) https://www.bis.org/publ/othp33.pdf accessed 2 July 2026.
Carstens A, Digital Currencies and the Future of the Monetary System (Bank for International Settlements, 27 January 2021) https://www.bis.org/speeches/sp210127.pdf accessed 2 July 2026.
Financial Action Task Force, Report to the G20 Finance Ministers and Central Bank Governors on So-Called Stablecoins (2020) https://www.fatf gafi.org/publications/virtualassets/documents/report-g20-so-called-stablecoins-june 2020.html accessed 2 July 2026.
International Monetary Fund, Central Bank Digital Currencies for Cross-Border Payments (FinTech Note No 2021/004, 2021) https://www.imf.org/en/Publications/fintech notes/Issues/2021/07/09/Central-Bank-Digital-Currencies-for-Cross-Border-Payments 461450 accessed 2 July 2026.
IMF Working Papers
Bossu W and others, Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations (IMF Working Paper No WP/20/254, 2020) https://www.imf.org/en/Publications/WP/Issues/2020/11/20/Legal-Aspects-of-Central-Bank Digital-Currency-Central-Bank-and-Monetary-Law-Considerations-49827 accessed 2 July 2026.
Journal Articles
Laband J, ‘Existential Threat or Digital Yawn: Evaluating China’s Central Bank Digital Currency’ (2022) 63 Boston College Law Review 516.
Book Chapters
Mu C, ‘Balancing Privacy and Security: Theory and Practice of the e-CNY’s Managed Anonymity’ in Central Bank Digital Currencies: Financial System Implications and Control (BIS Papers No 126, Bank for International Settlements 2022).
Working Papers and Preprints
Goodell G, Response to “The Digital Pound: A New Form of Money for Households and Businesses?” (arXiv:2305.09059v4, 9 June 2023) https://arxiv.org/abs/2305.09059 accessed 2 July 2026.
Goodell G, Al Nakib HD and Aste T, Retail Central Bank Digital Currency: Motivations, Opportunities, and Mistakes (arXiv:2403.07070v3, 13 January 2025) https://arxiv.org/abs/2403.07070 accessed 2 July 2026.
Gütschow M and Lucke B, The Digital Euro: An Analysis of the Commission’s Proposed Legislation (University of Hamburg and Dresden University of Technology, May 2025, rev July 2025) https://www.wiso.uni-hamburg.de/fachbereich-vwl/professuren/lucke/bilder/the commissions-proposal-for-a-digital-euro.pdf accessed 2 July 2026.
Tang Q and Si Y-W, Central Bank Digital Currencies: A Survey (arXiv:2507.08880v1, 10 July 2025) https://arxiv.org/abs/2507.08880 accessed 2 July 2026.
