Analysts say CBDCs pose danger to user privacy

What’s new? Analysts at The Alan Turing Institute in London have released a report suggesting that central bank digital currencies (CBDCs) could pose a danger to user privacy. If the wrong technology is chosen when creating a CBDC, the authorities could get detailed information about citizens’ income and expenses, the experts noted. They urged the public to discuss privacy concerns in the issuance of a state-owned cryptocurrency.

The Alan Turing Institute’s research

What else does the research say? According to the analysts, there are three key topics that should definitely be discussed in the debate on CBDC issuance:

• Which features of the asset will contribute to expanding access to financial services
• How the CBDC can provide a reasonable level of anonymity to accounts and transactions
• How the received data will be processed, stored, and eventually destroyed

The report says that if privacy issues are not addressed now, problems similar to those encountered in regulating social media could recur. Dr. Andrea Baronchelli, lead author and Token Economy Theme Lead at The Alan Turing Institute, stated:

“Central Bank Digital Currencies have the possibility of being more financial inclusive by offering convenience and low transaction costs. However, this comes at the risk of our privacy which we don’t believe should be compromised. We are in a unique position to encourage policymakers to make good design decisions as early as possible - before bad features become entrenched.”

In this, some countries’ central banks have already issued their own digital currencies, including the UK, Singapore, and Canada. 14 countries are already piloting the asset and more than 50 are in the research and development stage. The Bank of Jamaica was the first to adopt CBDC, also recognizing Jam-Dex as legal tender.

In early July, the CAR launched its national cryptocurrency, Sango Coin. The asset, along with bitcoin, became an official means of payment in the country.