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The public, the private and the secret: Thoughts on privacy in central bank digital currencies
This paper discusses the issues surrounding privacy and anonymity in the context of central bank digital currency (CBDC). Most notably, central banks calibrating the design criteria for CBDC must strike a balance between data protection and the individual’s right to privacy on the one hand, and the prevention of financial crime on the other. In this regard, there are — from a technical and governance point of view — a number of possible solutions. By way of illustration, this paper constructs three exemplary and simplified privacy scenarios. The paper also describes the need for standards to ensure the responsible treatment of data, and clear rules guaranteeing that access is restricted to public authorities fulfilling their mandates. When it comes to protecting user privacy in a CBDC system, this paper argues that independent central banks are ideally positioned to serve as an honest broker. In this respect, gaining the public’s trust and acceptance will be a key challenge for central banks.
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David Ballaschk is a senior payment expert for the Deutsche Bundesbank, where his work mainly focuses on cross-border and real-time payments. He is a member of various European working groups and has represented the Bundesbank in both the Cross-border Retail Payments Working Group and the Cross-border Payments Task Force. He has an MSc in economics from Martin-Luther University Halle-Wittenberg.
Jan Paulick is a principal expert in the Strategy, Policy and Oversight division in the Deutsche Bundesbank’s Directorate General Payments and Settlement Systems. His work focuses on quantitative analysis of financial market infrastructures as well as the implications of digital money and blockchain technology. He holds an MA in international economics from the University of Göttingen; he has also studied at UC Santa Cruz and Delhi School of Economics.
CitationBallaschk, David and Paulick, Jan (2021, September 1). The public, the private and the secret: Thoughts on privacy in central bank digital currencies. In the Journal of Payments Strategy & Systems, Volume 15, Issue 3.