CBDCs & Privacy: Considerations for an International Landscape

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Privacy, being a fundamental human right, holds significant importance in the investigation and development of Central Bank Digital Currencies (CBDCs). Preliminary evidence suggests that the level of privacy associated with CBDC use will greatly influence the adoption and usage of CBDCs. Currently, there is a perceived tradeoff between safeguarding users’ privacy and ensuring compliance with various regulations and policies such as Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT). However, it is important to note that this tradeoff is not a binary choice. By utilizing a range of privacy-enhancing techniques, each country has the opportunity to design a customized solution that achieves an optimal balance between these two objectives based on their specific needs and priorities.

Among the 130 countries currently exploring CBDCs, distinct values are emerging, with some placing higher importance on transactional anonymity for amounts below a certain threshold, guaranteeing complete irretrievability of associated data. Others prioritize centralization and traceability. For those countries seeking to achieve both maximum privacy and security, a combination of classical symmetric encryption with a Public Key Infrastructure (PKI) key exchange mechanism, advanced pseudonymization techniques, zero-knowledge proofs, and other cryptographic methods have been employed.

As a key value driver for many countries exploring CBDC is their cross-border use and settlement, the need to address cross-jurisdictional interoperability and privacy standards is becoming increasingly crucial. This poses a growing tension due to the diverse perspectives and values held by different jurisdictions. The question then arises: is achieving cross-jurisdictional interoperability feasible, and how can we navigate this path?

In this webinar, we delve into the tensions between privacy preservation and policy compliance within the context of CBDCs. We explore their implications for cross-border payments, the alignment with the protection of fundamental human rights, and the challenges posed by cross-jurisdictional interoperability. In particular, we focus on addressing the following questions:

  • What are the main concerns regarding privacy in a digital economy?
  • Which trade-offs exist between protecting personal information and ensuring compliance with AML/ CFT regulations?
  • How would the CBDC landscape function with varying regulations and differing values concerning privacy?
  • What are the risks associated with the absence of a common denominator worldwide regarding privacy and CBDCs?
  • What technological approaches are being employed to preserve privacy in the development and implementation of CBDCs?
  • What are the current approaches and values being discussed or agreed upon in different jurisdictions with regard to privacy and CBDCs?
  • Are cross-jurisdictional privacy standards feasible at a base level, and if so, how can we initiate the process of this collaboration?
  • How would the introduction of Secure and Sovereign Identity (SSID) systems impact the discourse on privacy in the context of CBDCs?



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