Can Central Bank Digital Currencies Protect Individual Privacy?
Crypto industry leaders and law experts debated the privacy implications of central bank digital currencies (CBDC) during the ‘Money Re-Imagined’ panel as part of Consensus:Distributed on May 11.
Lawrence Summers, the former U.S. Treasury Secretary and former chief economist of the World Bank, argued that the current fiat monetary system exhibits issues of too much privacy, advancing that a CBDC should seek to facilitate greater oversight capabilities.
Current monetary system has ‘too much privacy’
Summers argued that supporting the anonymous movement of multi-million dollar sums of money should not be an objective of financial policy:
“Of all of the important freedoms, the ability to possess, transfer and do business with multi-million dollar sums of money seems to me to be one of the least important freedoms governments should be preserving. […] The case for central bank digital currencies is around equalizing the playing field between smaller and larger players, and making it more difficult for anonymous forms of finance to flourish.”
Lawmakers are responsible for privacy issues
Caitlin Long, a proponent of Wyoming’s regulatory embrace of blockchain and the founder and chief executive of Avanti Bank & Trust — a forthcoming bank that will provide services to firms operating with crypto, asserted that the separate issues of privacy and anonymity are often conflated in the debate surrounding virtual currencies.
Long also argued that the financial sector is burdened with regulations mandating the compromise of individuals’ private information, asserting that many financial institutions are forced to comply with legislation that they do not agree with.
Digital Dollar unlocks ‘nuanced’ privacy capabilities
Christopher Giancarlo, the director of the Digital Dollar Project and former chairman of the U.S. Commodity Futures Trading Commission (CFTC), asserted that a state-issued virtual currency affords opportunities to code nuanced privacy balanced individual rights with the oversight needs of government.
“Getting the privacy balance right” must be a “design imperative” for any digitized fiat currency, argued Giancarlo.
Giancarlo argued that the objective of a digital dollar should be the creation of a currency that is the preferred unit of money among the public by choice, stressing that the design for any digital dollar initiative must be informed through vigorous public debate.
Privacy concerns manifest disparately across cultures
Sheila Warren, the head of blockchain and data policy at the World Economic Forum, offered a nuanced account of the privacy issues surrounding the digitization of fiat currencies — highlighting the importance of different countries’ socio-political particularities.
Warren emphasized the unique and diverse cultural, economic and political contexts in which digital currencies will emerge, arguing that the discourse surrounding privacy concerns differs significantly across different societies.
CBDC and private digital currencies to converge
Dante Disparte, the vice-chairman of the Libra Association, argued that a plurality of private and digital currencies will best serve the public, allowing individuals to choose to use whichever protocols best serve their needs.
Disparte added that the objective of digital currency initiatives should be greater ‘optionality’, describing the current lack of monetary options as creating the vulnerabilities that led to the current economic crisis.
