As we head towards a digital future, money is transforming into bits and bytes. A growing number of countries are jumping on the Central Bank Digital Currency (CBDC) bandwagon, but what does this mean for society, businesses, and banks?
CBDCs, hailed as government-backed digital fiat money, are being positioned as a rival to cryptocurrencies. However, as plans for their introduction take shape, concerns around privacy and security have emerged.
Individuals may be required to divulge personal information to use CBDCs, raising questions about the extent of government surveillance. The fear of being monitored in our daily transactions looms large, and the thought of authorities using this data to manipulate consumer behavior is a chilling one.
Governments have been quick to jump on the CBDC train, perhaps as a response to the opaque world of crypto. With its volatility and lack of regulation, it’s no surprise that regulators and governments are hesitant to fully embrace cryptocurrencies.
Despite the recent news of El Salvador making bitcoin legal tender, crypto still faces an uphill battle to be considered a legitimate currency. Only time will tell if this bold move by El Salvador will pay off.
In the midst of all this, former US President Donald Trump has added his voice to the debate. Speaking at a rally in New Hampshire, he declared CBDCs as a “dangerous threat to freedom.” In a surprising twist, pro-crypto advocate Vivek Ramaswamy, who recently withdrew from the presidential race, appeared on stage with Trump, showing his support for the former leader’s views. With his past dismissive remarks about crypto, it’s no surprise that Trump remains unconvinced about the value of CBDCs.
Amidst the buzz of the 2024 presidential race, the leading Republican candidate has once again vowed to protect Americans from government intrusion by rejecting the implementation of a CBDC. But with concerns over privacy and security looming, is introducing CBDCs really the answer to our problems? Can we navigate these issues while still safeguarding our personal information?
The Bank for International Settlements (BIS) seems to think so, as they unveiled their revolutionary findings in their November 2023 report, aptly named “Project Tourbillon”. This groundbreaking project delves into the realm of privacy and security, presenting a novel concept of “payer anonymity” that strikes a delicate balance between user needs and public policy objectives.
Imagine this scenario: a consumer pays for goods at a store using CBDCs, without divulging any personal information to anyone, not even the merchant, banks, or the central bank. While the merchant’s bank may receive information about the identity of the payer, it remains confidential and out of reach from the central bank. In this way, personal payment data is shielded from prying eyes.
Thanks to the BIS and their innovative Project Tourbillon, a new era of privacy protection may be on the horizon. And with it, the possibility of achieving harmony between digital currency and individual rights.
Does China Lead the Way into the Future?
Throughout the years, numerous nations have been covertly developing their own CBDCs, with China’s e-CNY pilot making its mark by being widely distributed and utilized. The Beijing Winter Olympics venues saw the digital currency in action from February to March of 2022.
Joining in on the trend, Singapore’s regulatory authority, the Monetary Authority of Singapore (MAS), announced their plans to team up with China in piloting the e-CNY in hopes of boosting tourism spending. The two countries had previously signed a Memorandum of Understanding in 2020, and while no timeline was given for the trial run, excitement continues to build.
Meanwhile, Sweden’s central bank, Riksbank, has taken measures to ensure privacy for its e-krona CBDC pilot, as the country moves towards a cashless society.
Not to be left behind, the Bahamas, Jamaica, and Nigeria have already launched their own CBDCs, while over 100 countries are currently in the exploration stage. Leading the pack are central bankers in Brazil, China, the euro area, India, and the UK, as reported by the International Monetary Fund (IMF). It seems the world is quickly moving towards a digital future.
