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Abstract
Objectives: This work aims to contribute towards Tanzanian Central Bank Digital Currency (CBDC) users’ privacy preservation. It proposes the design of a privacy preserving CBDC which might be issued by Tanzania's Central Bank (CB), the Bank of Tanzania (BoT), which is currently in CBDC research phase. The work also aims to contribute to literature, the CBDC research being done by BoT, other CBs and CBDC stakeholders around the world. Methods: By using the Design Science Research (DSR) methodology, a privacy preserving CBDC design suitable for Tanzania was proposed, demonstrated and evaluated. This is the result of existing literature showing that different countries have different CBDC designs due to their differences in contexts and purposes for CBDC issuance. This consequently emphasized the fact that a CBDC design should not be treated as a one-size fits all solution. Findings: As opposed to the existing general and other country specific CBDC designs, we proposed a privacy preserving CBDC design suitable for Tanzania by consulting literature and taking into consideration the Tanzanian context. The design appears to be promising Tanzanian CBDC users’ privacy preservation though further work needs to be done. The work should not only be on practical evaluation of the proposed design but also on other factors impacting the success of CBDC projects. This will consequently further increase the success probability of CBDC projects, hence the potential for practical realization of CBDC project benefits. Novelty: Existing literature has shown that, considering the countries’ differences in context and CBDC issuance purposes, CBDC design should not be treated as a generic solution thereby obliging the need for country-specific CBDC designs. Consequently, the privacy preserving CBDC design suitable specifically for Tanzania consists of and provides an outline of privacy preserving interactions among the identified key Tanzanian CBDC participants or actors. The actors are the BoT, the intermediaries (i.e., other banks and payment service providers), Tanzania’s National Identification Authority (NIDA), financial transactions violation detection engine, and the expected CBDC users. Keywords: Digital currency, database privacy, central bank digital currency, privacy
Highlights
A digital currency is a currency form that exists only in electronic or digital form, and can be used to make online payments
Considering the degree of attention drawn on Central Bank Digital Currency (CBDC), their potential benefits, and the risks associated with the raised CBDC privacy concerns, the design of a privacy-preserving CBDC will contribute to increasing the success probability of a CBDC project
Considering the goal of this work, the Design Science Research (DSR) methodology was used to propose the design of a privacy preserving CBDC suitable for Tanzania’s context
Summary
A digital currency is a currency form that exists only in electronic or digital form, and can be used to make online payments. CBDC has a number of potential benefits such as improving monetary policy conduct, enhancing efficiency of digital payment systems, lowering transaction charges and increasing financial inclusion (1), (2). In connection with those concepts, database privacy is the protection of sensitive personal information such as names, addresses, phone numbers, emails, postal and physical addresses, financial and medical records stored in a database from unauthorized access, use or disclosure (2). This work aims to propose a privacy preserving CBDC design suitable for Tanzania It will provide a description of privacy in CBDCs, the important design considerations for a privacy preserving CBDC as extracted from existing literature, and the proposed Tanzanian privacy preserving CBDC design. It includes the proposed design’s demonstration and evaluation, and eventually a conclusion with suggestions of future related research work areas
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