{"id":2940,"date":"2020-12-09T06:37:45","date_gmt":"2020-12-09T06:37:45","guid":{"rendered":"https:\/\/timestampmag.com\/?p=2940"},"modified":"2021-09-08T10:11:24","modified_gmt":"2021-09-08T10:11:24","slug":"cbdcs-and-privacy-concerns","status":"publish","type":"post","link":"https:\/\/timestampmag.com\/2020\/12\/09\/cbdcs-and-privacy-concerns\/","title":{"rendered":"CBDCs and Privacy Concerns"},"content":{"rendered":"<ul>\n<li><b>Starting with France, more than 40 countries have allegedly proposed a state-backed digital currency (CBDC) to lead the era of a cashless economy.\u00a0<\/b><\/li>\n<li><b>Unlike Bitcoin that is completely decentralized, CBDCs are centralized digital currencies and will be prone to central control brewing a lot of privacy concerns.\u00a0<\/b><\/li>\n<li><b>A robust digital world often means less privacy. Digital currencies like CBDC won\u2019t be an exception, but addressing these concerns early enough could make a lot of difference.\u00a0<\/b><\/li>\n<\/ul>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-2941 size-full\" src=\"https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image2-4.jpg\" alt=\"\" width=\"900\" height=\"620\" srcset=\"https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image2-4.jpg 900w, https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image2-4-300x207.jpg 300w, https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image2-4-768x529.jpg 768w\" sizes=\"(max-width: 900px) 100vw, 900px\" \/><\/p>\n<p><b><i>Image source: <\/i><\/b><b><i>Nairametrics<\/i><\/b><\/p>\n<p><span style=\"font-weight: 400;\">Since <\/span><span style=\"font-weight: 400;\">Central Bank Digital Currency (CBDC)<\/span><span style=\"font-weight: 400;\"> came into the limelight, it has inspired a lot of heated arguments in the <\/span><span style=\"font-weight: 400;\">crypto industry<\/span><span style=\"font-weight: 400;\">, most of which centers on how the digital assets will affect the entire crypto space. How does the proposed CBDC handle privacy concerns? This forms part of the major issues trailing CBDC adoption.\u00a0<\/span><\/p>\n<h1><strong>What is CBDC?<\/strong><\/h1>\n<p><span style=\"font-weight: 400;\">CBDC is a government-issued digital form of fiat currency backed by the government. Typical CBDC leverages on blockchain technology to issue the digital token that is a representation of the country\u2019s native currency. Unlike decentralized <\/span><span style=\"font-weight: 400;\">crypto assets<\/span><span style=\"font-weight: 400;\">, CBDCs are centralized digital assets, implying that the issuing authority has control over the asset. <\/span><\/p>\n<h2><b>Why CBDC? Importance Of A State-backed Digital Note<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Just like the regular cash, CBDC will act as a unit of exchange for everyday payment but in digital form. Additionally, it would be a medium of store of value, an official unit of account. Just like each paper note is distinguishable and impossible to counterfeit, each CBDC will be protected with a unique serial number void of mutation.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Important to mention that governments have been wary of the continuous rise and widespread adoption of Bitcoin and other cryptocurrencies; calling out the scams and crimes perpetrated using Bitcoin payment. Despite this cold attitude, governments have had a soft landing for blockchain technology due to its capabilities and the role it plays across major industries.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the era of <span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Commodity backed cryptocurrency&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:15289,&quot;3&quot;:{&quot;1&quot;:0},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;10&quot;:2,&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}\"><a href=\"https:\/\/timestampmag.com\/2020\/06\/30\/the-rise-of-asset-backed-digital-currencies\/\" target=\"_blank\" rel=\"noopener\"><strong>Commodity backed cryptocurrency<\/strong><\/a>, t<\/span>he cashless era is inevitable. To be able to prepare for what is to come; CBDC was founded to lead the cashless movement. Many <\/span><span style=\"font-weight: 400;\">countries have already<\/span><span style=\"font-weight: 400;\"> launched a test experiment of a version of a state-owned digital currency.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Bank of England was the first to propose the launch of CBDC, not too long other countries like <\/span><span style=\"font-weight: 400;\">China\u2019s <\/span><span style=\"font-weight: 400;\">People\u2019s Bank of China (PBoC)<\/span><span style=\"font-weight: 400;\">, <\/span><span style=\"font-weight: 400;\">Bank of Canada (BoC)<\/span><span style=\"font-weight: 400;\"> and central banks of Uruguay, Thailand, Sweden, Venezuela, and Singapore, among others, have followed suit.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although there are a number of issues to be addressed when it comes to CBDC, however, a state-backed digital note could be a game-changer in the world\u2019s financial landscape.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A cross-border CBDC could lead to significant advantages for consumers and financial institutions alike. A <\/span><span style=\"font-weight: 400;\">wholesale digital currency<\/span><span style=\"font-weight: 400;\"> could streamline and open up a world of smooth cross-border payment flow. CBDC will ultimately allow merchants and consumers to transact and frictionlessly send payments globally without major hiccups.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Anchoring a virtual conference about the future of money, European Central Bank (ECB) executive board member Yves Mersch said:<\/span><\/p>\n<p style=\"text-align: center;\"><i><span style=\"font-weight: 400;\">\u201cWe have to be ready. Ready to embrace financial technological innovation which has the potential to transform payments and money faster, and in more disruptive ways, than ever before,\u201d<\/span><\/i><\/p>\n<h2><strong>Privacy Concerns for CBDCs Ought To Be Addressed<\/strong><\/h2>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-2942 size-full\" src=\"https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image1-1.png\" alt=\"\" width=\"705\" height=\"393\" srcset=\"https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image1-1.png 705w, https:\/\/timestampmag.com\/wp-content\/uploads\/2020\/11\/image1-1-300x167.png 300w\" sizes=\"(max-width: 705px) 100vw, 705px\" \/><\/p>\n<p><b><i>Image source: <\/i><\/b><a href=\"https:\/\/www.apc.org\/en\/pubs\/apc-welcomes-eus-general-data-protection-regulation-calls-stronger-privacy-protections-globally\" target=\"_blank\" rel=\"noopener\"><b><i>APC<\/i><\/b><\/a><\/p>\n<p><span style=\"font-weight: 400;\">Amidst the excitement fueling the launch of CBDCs, <\/span><span style=\"font-weight: 400;\">privacy concerns for CBDCs hasn\u2019t been thoroughly addressed. <\/span><span style=\"font-weight: 400;\">The benefit of a cashless society is glaring and is capable of radically changing the way we interact with money. But for this to come to fruition, we might be sacrificing a lot at the expense of privacy and anonymity.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The idea of privacy is a very important one that cannot be swept under the carpet. To many people it\u2019s a very crucial aspect of their financial dealings. Will the proposed CBDC be just another primary tool for financial surveillance by the government?\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The rising <\/span><span style=\"font-weight: 400;\">privacy concerns for CBDCs borders across everyday life. <\/span><span style=\"font-weight: 400;\">Even if you don\u2019t have the mindset to embezzle public funds or commit tax fraud, there are numerous reasons why you might want to keep your financial transactions private. These reasons will be defeated when CBDC becomes a tool for the financial watchdog in the government.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Federal Reserve Bank of Boston\u2019s, director of applied research Robert Bench <\/span><span style=\"font-weight: 400;\">reiterated<\/span><span style=\"font-weight: 400;\"> his stance while addressing privacy concerns for CBDCs:\u00a0<\/span><\/p>\n<p style=\"text-align: center;\"><i><span style=\"font-weight: 400;\">\u201cOne of our learnings is that the questions of privacy and identity must be considered at the earliest stage of the architecture. Making privacy or identity an ad hoc process is suboptimal from both a privacy or identity perspective, and most importantly from a security perspective.\u201d<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">A largely digital world often means less privacy. Digital currencies like CBDC won\u2019t be an exception, but addressing these concerns early enough could make a lot of difference. As countries look to issue <\/span><span style=\"font-weight: 400;\">digital currencies<\/span><span style=\"font-weight: 400;\">, payments are going to be less private than cash transactions. The privacy that people deserve might be jeopardized.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cIt\u2019s something that policymakers are going to need to think about early,\u201d Bench said of privacy. \u201cWhen you add it on later, it doesn\u2019t work as well.\u201d<\/span><\/p>\n<h3><b>Borrowing A Leaf From Cash<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">To properly address privacy concerns for CBDCs, it might be necessary to use cash as a benchmark or yardstick for what a privacy-focused digital asset should be. Cash <\/span><span style=\"font-weight: 400;\">possesses<\/span><span style=\"font-weight: 400;\"> certain immutable properties such as anonymity, fungibility and privacy at the peer-to-peer level.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It will be a game-changer and something worth reckoning if such technology can replicate these exact features of the paper dollar on the proposed CBDCs. A digital dollar with lesser freedom will only be a surveillance tool for the authorities. Follow <span data-sheets-value=\"{&quot;1&quot;:2,&quot;2&quot;:&quot;Top cryptocurrency blogs&quot;}\" data-sheets-userformat=\"{&quot;2&quot;:15289,&quot;3&quot;:{&quot;1&quot;:0},&quot;6&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;7&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;8&quot;:{&quot;1&quot;:[{&quot;1&quot;:2,&quot;2&quot;:0,&quot;5&quot;:{&quot;1&quot;:2,&quot;2&quot;:0}},{&quot;1&quot;:0,&quot;2&quot;:0,&quot;3&quot;:3},{&quot;1&quot;:1,&quot;2&quot;:0,&quot;4&quot;:1}]},&quot;10&quot;:2,&quot;11&quot;:0,&quot;12&quot;:0,&quot;14&quot;:{&quot;1&quot;:2,&quot;2&quot;:0},&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}\"><a href=\"https:\/\/timestampmag.com\/category\/blog\/\" target=\"_blank\" rel=\"noopener\"><strong>Top cryptocurrency blogs<\/strong><\/a> for more updates.<\/span><\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Starting with France, more than 40 countries have allegedly proposed a state-backed digital currency (CBDC) to lead the era of a cashless economy.\u00a0 Unlike Bitcoin that is completely decentralized, CBDCs are centralized digital currencies and will be prone to central control brewing a lot of privacy concerns.\u00a0 A robust digital world often means less privacy. [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":2997,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23,20],"tags":[30,19,241,416,393,137,157,400,417],"_links":{"self":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts\/2940"}],"collection":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/comments?post=2940"}],"version-history":[{"count":4,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts\/2940\/revisions"}],"predecessor-version":[{"id":51191,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/posts\/2940\/revisions\/51191"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/media\/2997"}],"wp:attachment":[{"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/media?parent=2940"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/categories?post=2940"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/timestampmag.com\/wp-json\/wp\/v2\/tags?post=2940"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}