- Retail central bank digital currencies (CBDC) have drawn criticism from lawmakers and the public around the world over privacy concerns.
- Unlike the private sector, central banks have no interest in personal data, Bank for International Settlements official Cecilia Skingsley said Tuesday.
- She urged people to stay open to technological innovation.
Central banks have no interest in personal data, said Bank for International Settlements (BIS) official Cecilia Skingsley on Tuesday, seemingly looking to quell privacy concerns surrounding national digital currencies.
The central bank group has been pushing governments around the world to continue work on central bank digital currencies (CBDC) to prepare for the future of payments.
However, monetary authorities in major jurisdictions like the U.S. and the European Union are facing mounting criticism over plans to issue CBDCs, and a chief concern is if and how citizens’ privacy will be protected.
The public too would feel better about using digital versions of fiat currencies like the U.S. dollar or British pound if privacy was preserved. Ensuring privacy increased participants' willingness to use a CBDC by up to 60% when purchasing privacy-sensitive products, a recent BIS report showed.
Skingsley, is the head of the BIS’ Innovation Hub which is responsible for multiple CBDC research projects with central banks around the world. Skingsley addressed privacy fears while speaking at the Atlantic Council's CBDC conference in Washington DC, and urged the public to stay open to technological innovation.
"Central banks have no commercial interest in personal data – unlike the private sector," she said.
Information that banks have on where, how and what people spend money on is protected by legal frameworks – something which Skingsley urged should be preserved when countries decide to issue retail CBDCs.
When considering the design of a CBDC, people will also have to grapple with difficult questions on choice, inclusion and stability, Skingsley said. But "innovation usually takes us to new places and opens up possibilities that were not there until a new technological breakthrough has happened," she added.
Some people are concerned that retail CBDCs could cause bank runs – where too many people withdraw their money at the same time putting pressure on banks’ liquidity. With the right provisions like fast-acting crisis management tools and limits on fund withdrawals, CBDCs won't necessarily increase the possibility of bank runs, Skingsley said.
"Based on our findings, benefits from issuing a wholesale CBDC could include operational transparency, faster settlement, and less risk," Skingsley said.
The BIS will on Wednesday publish the conclusions from project Tourbillon, which proposes new privacy solutions for retail CBDCs.
STORY CONTINUES BELOW
