Retail central bank digital currencies (CBDCs) have drawn criticism from lawmakers and the public around the world over privacy concerns.
Unlike the private sector, central banks have no interest in personal data, Cecilia Skingsley, an official at the Bank for International Settlements, said Tuesday.
He urged people to remain open to technological innovation.
Central banks have no interest in personal data, Bank for International Settlements (BIS) official Cecilia Skingsley said on Tuesday, apparently seeking to calm privacy concerns around national digital currencies.
The central bank group has been pushing governments around the world to continue working on central bank digital currencies (CBDCs) to prepare for the future of payments.
However, monetary authorities in major jurisdictions such as the United States and the European Union are facing growing criticism over plans to issue CBDCs, with one of the main concerns being whether and how citizens’ privacy will be protected.
The public would also feel better about using digital versions of fiat currencies like the US dollar or British pound if privacy were preserved. Ensuring privacy increased participants’ willingness to use a CBDC by up to 60% when purchasing privacy-sensitive products, a recent BIS report showed.
Skingsley is the director of the BIS Innovation Center, responsible for multiple CBDC research projects with central banks around the world. Skingsley addressed privacy fears while speaking at the Atlantic Council’s CBDC conference in Washington DC and urged the public to remain open to technological innovation.
“Central banks have no commercial interest in personal data, unlike the private sector,” he said.
The information banks have about where, how and what people spend money on is protected by legal frameworks, something Skingsley urged to preserve when countries decide to issue retail CBDCs.
When considering the design of a CBDC, people will also have to grapple with difficult questions about choice, inclusion and stability, Skingsley said. But “innovation typically takes us to new places and opens up possibilities that didn’t exist until a new technological breakthrough occurred,” she added.
Some people worry that retail CBDCs could lead to bank runs, where too many people withdraw their money while putting pressure on banks’ liquidity. With the right provisions, such as fast-acting crisis management tools and limits on withdrawals, CBDCs will not necessarily increase the possibility of bank runs, Skingsley said.
Wholesale CBDCs, which are another type of currency used only between banks, could be a “game changer” for cross-border payments, he added, pointing to BIS Innovation Hub projects such as Jura, Dunbar and mBridge as examples.
“Based on our findings, the benefits of issuing a wholesale CBDC could include operational transparency, faster settlement, and less risk,” Skingsley said.
The BIS will publish on Wednesday the conclusions of the Tourbillon project, which proposes new privacy solutions for retail CBDCs.
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