Privacy implications of central bank digital currencies (CBDCs): a systematic review of literature

Abstract

This study employs a systematic review of the literature to critically analyze the privacy implications of central bank digital currencies (CBDCs). Against the backdrop of a global digital revolution spurred by financial crises and the rise of cryptocurrencies, the emergence of CBDCs has garnered substantial attention from central banks worldwide. The study’s main objective is to fill a significant gap in the literature by providing an evidence-based assessment of the privacy issues of CBDCs. Through a meticulous analysis of the 46 selected papers, the study identifies key findings, including diverse perspectives on CBDC models, aspects and gaps in CBDC research, and various privacy concerns, such as extensive data collection in the direct CBDC model, challenges related to central bank data retention in the hybrid CBDC model, and increased operational complexity in the intermediated CBDC approach associated with CBDC implementation. The critical analysis points toward the urgent need for more extensive research into the privacy and security aspects of CBDCs to ensure user protection and trust. The findings contribute valuable insights for policymakers, regulators, and stakeholders in shaping the responsible creation and use of CBDCs.