US Treasury Official Warns Against Privacy Abuse With Incoming CBDC
A US Treasury official is warning of the risk of privacy violations with the potential launch of a central bank digital currency (CBDC).
In a new speech at the Transform Payments USA 2023 Conference in Texas, Graham Steele, the US Treasury’s Assistant Secretary for Financial Institutions, says CBDCs present a significant user privacy challenge.
“An additional challenge is protecting user privacy while minimizing risks of illicit financial transactions. Fulfilling both of these important objectives requires a careful balance in the design of any potential retail CBDC.”
He says that there are already segments of the population who have a distrust of institutions that keep them disengaged from the banking system and a CBDC would likely heighten that distrust.
“Privacy concerns and lack of institutional trust are already among the most cited reasons that some individuals avoid the banking system. In particular, as Treasury has previously noted, some communities may be more privacy sensitive and have heightened concerns about private or public entities accessing their personal information.”
Steele says any potential launch of a CBDC should explore the use of privacy technologies to build user trust.
“In this vein, it is important that we consider the extent to which privacy and anonymity might be preserved and explore the technologies and methods available, including Privacy Enhancing Technologies (PETs), to enable such protections in the design of any potential retail CBDC.
Such technologies could play a crucial role in maintaining transactional privacy while also ensuring transparency and traceability, thus reinforcing the trust of users in digital financial transactions.”
He notes that while the United States has not decided whether it will pursue a CBDC, the Treasury Department is already spearheading an interagency working group to study the implications of a potential central bank digital currency.
“The working group is evaluating policy objectives related to global financial leadership, national security, and privacy, illicit finance and financial inclusion.
Striking the right balance between these priorities, and realizing potential benefits while minimizing risks, would depend on the design of both policy and technology.”
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