The European Central Bank published its first progress report on June 24 on the development of a central bank digital currency (CBDC). Indeed, privacy protection provisions are at the heart of the concerns. The ECB notably promises pseudonymization, hashing functions, and encryption features as bulwarks against the traceability of individuals.
Other points to consider
Payment service providers will not be able to use consumer financial data for commercial services. It will be necessary to obtain the explicit consent of the person involved beforehand. Methods to perform offline transactions are also presented. The update briefly touched upon the issue of supporting offline transactions. These transactions would occur directly between parties without going through a third-party intermediary.
Moreover, these payments would be settled directly on devices used by users such as smartphones or smart cards. These will be powered by batteries or rely on relays to synchronize transactions with the CBDC blockchain. Indeed, the report concludes by indicating that the newly established “Rulebook Development Group” will finalize its first regulatory framework for CBDCs. The first final version is to be delivered by the end of 2024.
Digital management at the heart of the discussion
Indeed, issues related to privacy and human freedoms remain significant concerns. These pertain to the widespread use of central bank digital currencies. At the same time, anti-CBDC sentiment continues to grow within the cryptocurrency community. During the recent Oslo forum, speakers and participants reviewed several cases where state actors improperly seized individual assets to suppress dissent. These examples are presented as a foretaste of government control and grip regarding state-controlled blockchain currencies.
According to a 2023 report by Trezor, 73% of respondents expressed their discontent about potential privacy issues. Critics argue that these risks far outweigh the benefits of a CBDC when considering stablecoins. This raises questions about the redundancy of central bank digital fiat currency and more general issues related to CBDC adoption.
American lawmakers take a stance
American lawmakers are leading the charge against CBDCs. Former President Trump has vowed to prevent the implementation of a CBDC in the United States. Last May, the United States House of Representatives voted in favor of the “CBDC Anti-Surveillance State Act.” Moreover, it is a bill highlighting the extreme dangers posed by centrally controlled digital currency to freedom in open societies. There is still much to be done to develop CBDCs in the crypto world globally.
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