BIS Official: Central Banks, CBDCs, and the Privacy Promise

• Retail Central Bank Digital Currencies and Privacy Concerns
• Criticism of CBDC's
• The BIS Innovation Hub and Cecilia Skingsley
• CBDCs Critiques and Game Changers

Retail Central Bank Digital Currencies and Privacy Concerns

Retail central bank digital currencies (CBDC) have had their fair share of opposition from global legislators and citizens alike, primarily due to apprehensions related to privacy. Cecilia Skingsley, an official at the Bank for International Settlements (BIS), stated on Tuesday that central banks show no interest in personal information, unlike the private sector. She emphasized the need for people to remain receptive to technological advancements.

Criticism of CBDC's

Central banks have been encouraging governments globally to persist in their CBDC projects to be future-ready for payments. On the flip side, key jurisdictions such as the U.S. and the European Union are encountering increased resistance over their plans to launch CBDCs, with privacy protection being a primary concern.

The general public would be more comfortable using digital analogues of fiat currencies such as the U.S. dollar or the British pound if privacy was guaranteed. As per a recent BIS report, ensuring privacy resulted in a willingness to use a CBDC increase of up to 60% when buying privacy-sensitive products.

The BIS Innovation Hub and Cecilia Skingsley

Cecilia Skingsley, the head of the BIS Innovation Hub, which leads numerous CBDC research projects with central banks globally, addressed these privacy concerns at the Atlantic Council's CBDC conference in Washington DC. Central banks have no commercial interest in personal data - unlike the private sector, she quoted.

She emphasized that the information banks possess about where, how, and on what individuals spend money is legally protected - a protection she believes must continue when countries opt to issue retail CBDCs. However, the design of a CBDC would also bring up challenging questions about choice, inclusion, and stability.

CBDCs Critiques and Game Changers

Some worry that retail CBDCs could lead to bank runs, where a mass withdrawal of money simultaneously could strain banks' liquidity. However, Skingsley is of the view that with the right provisions in place, such as rapid crisis management tools and withdrawal limits, CBDCs would not necessarily heighten the risk of bank runs.

She also mentioned that wholesale CBDCs, another type of currency used exclusively between banks, could revolutionize cross-border payments. Projects such as Jura, Dunbar, and mBridge from the BIS Innovation Hub are cited as examples.

Based on our findings, benefits from issuing a wholesale CBDC could include operational transparency, faster settlement, and less risk, she quoted. On Wednesday, BIS will publish the findings from project Tourbillon, which offers new privacy solutions for retail CBDCs.

Edited by Jonathan Stoker