Optimal CBDC design for Ukraine through the lens of privacy and security

Abstract

The growing popularity of cryptocurrencies has put on the agenda the need to develop an alternative and more regulated digital currency design, including a central bank digital currency (CBDC). The objective of the study is to formulate proposals for the development of the optimal design of the CBDC of Ukraine. The study is based on a review of the literature on digital currencies, cryptocurrencies and legislation on personal data protection, payment security and financial supervision. The implementation of the CBDC in Ukraine is associated with numerous technical and legal risks, including: privacy and data security risks; complications of financial monitoring; contradictions with national and international legislation; banks disintermediation risks. To prevent these risks, a CBDC design is proposed that is compatible with national and international legislation, ensures data privacy and security, facilitates financial tracking, and reduces the risks of disintermediation. The development of the CBDC in Ukraine could have a significant impact on the country's financial system. However, it is essential that the design of the CBDC is carefully considered to mitigate potential risks.