Privacy and confidentiality options for CBDC
As more central banks begin researching the possibilities of issuing a central bank digital currency (CBDC), there is a common concern around the impact this will have on privacy. Of the 8,200 comments received by the European Central Bank (ECB) during its consultation period on the potential for a Euro-denominated CBDC, 41% of all replies centred around privacy.
CBDC acceptance will therefore depend in part on users’ trust in the privacy offered by CBDC. However, the notion of privacy is not consistent across the globe and privacy preferences; policies and laws vary significantly by culture and region. Privacy is not a binary choice – there is a spectrum of configurations to enable varying levels of privacy. In many jurisdictions, privacy rights need to be considered in light of the disclosure requirements of policies aimed at combatting money laundering or terrorism.
This paper takes a technology-first approach, clarifying the options available to policy-makers without recommending one option over another. The guidance can be used to implement successful CBDC design that respects user privacy while reducing risk and meeting regulatory requirements.