Abstract
The economic fallout of the COVID-19 pandemic prompted many governments to provide emergency payments to citizens. These one-off and recurring payments revealed the shortcomings of existing financial infrastructures even as electronic payments replaced cash for everyday expenses. Delays in getting government payments to citizens in many countries focused attention on the potential benefits of central bank digital currencies (CBDCs). This article outlines the social and economic policy choices involved in designing a CBDC and the consequences of these choices for privacy. Priorities including preventing the criminal abuse of the financial system, geopolitical concerns and private sector innovation compete with, and potentially undermine, privacy. We identify and categorize four key privacy risks as ‘losses’ associated with current CBDC models: loss of anonymity, loss of liberty, loss of individual control, and loss of regulatory control.
Highlights
Emergency Payments in a PandemicAs businesses closed and people retreated indoors during the early months of the COVID-19 crisis, nation states found themselves confronted by the inadequacies of their own financial infrastructures
We suggest that being clear about the goals for any central bank digital currencies (CBDCs) will help central banks to explain choices that will need to be made about the level of privacy offered by a particular CBDC
AUSTRAC receive information on domestic fund transfers through a ‘suspicious matter report’ where the reporting entity questions the legitimacy of a domestic transaction, or if a transaction is above AUD$10,000 in cash or ‘e-currency.’[61]. To address transactions that fall below this threshold, AUSTRAC worked with members of the Fintel Alliance, a public–private partnership established by AUSTRAC, to develop data-matching and machine-learning tools that are combined with privacypreserving technology.[62]
Summary
Emergency Payments in a PandemicAs businesses closed and people retreated indoors during the early months of the COVID-19 crisis, nation states found themselves confronted by the inadequacies of their own financial infrastructures.
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