The question of privacy remains a very big question in the creation of a central bank digital currency. According to Robert Bench, director of applied research at the Federal Reserve Bank of Boston, there should be a concentration on privacy from the first day of a CBDC’s development.
Privacy is Crucial
Privacy is very crucial and an important factor when we see it from a technical point of view. While talking at the Chamber of Digital Commerce panel, Bench said,” One of our learnings is that the questions of privacy and identity must be considered at the earliest stage of the architecture.”
If cash is replacing with digital money, it means privacy is decreasing. In traditional transactions, stakeholders have privacy protection, but in digital transactions, there is less privacy and users can become vulnerable to less-privacy issues.
Bench argues that with the start of CBDC development, the policymakers should keep in mind the users’ privacy. This is because if you add privacy in the later stage, it will not work well.
In the same panel discussion, Craig Sellars, co-founder of Tether, has also expressed his opinion. According to Sellars, the standard of privacy used in traditional money is also applicable in the digital world. “They have certain unremovable features: Fungibility, privacy and anonymity at the peer-to-peer level,” he Sellars added.
He further says that in building a private CBDC type digital currency, the United States has “an open field.” In comparison, other countries have a structure like “walled garden.”
The discussion held in preserving the privacy of users, while the government of the United States is taking a hard hand in breaking the privacy structure of already established crypto projects. For instance, two on-chain blockchain firms were hired by the U.S. Internal Revenue Service to dismantle the advanced privacy technology of Monero (XMR), known for anonymous nature.
The US is behind other countries in the development of a central bank digital currency as few states are close to launching a CBDC for the public. For instance, China is at the final stage of launching digital yuan for the public.