In a new comment piece published in Nature Human Behaviour, lead author and City researcher says the new currency runs the risk of eroding individual privacy.
In a new comment piece, Central bank digital currencies risk becoming a digital Leviathan, published in Nature Human Behaviour, Dr Andrea Baronchelli says Central Bank Digital Currency (CBDC), a new type of digital currency, runs the risk of eroding individual privacy, even though they give more people access to banking services.
Dr Baronchelli, the lead author of the comment piece, (alongside Hanna Halaburda and Alexander Teytelboym) and a City researcher in the Department of Mathematics, is also a Token Economy Theme Lead at The Alan Turing Institute.
He and his co-authors are calling for a public debate on these privacy concerns around Central Bank Digital Currency (CBDC). They say that the rush to issue CBDCs with the absence of a well-informed discussion could drastically reduce the little individual privacy that still remains.
The researchers also argue that failing to address privacy concerns now, could echo issues around the regulation of social media platforms.
CBDCs, a digital form of the currency issued by a central bank, already exist in many places including the UK, Singapore, South Africa and Canada. They are becoming increasingly popular with 14 countries already piloting them and over 50 have announced that they are in the research and development stage.
Their wide adoption will create a dramatic change in how much data is generated by everyday transactions. The researchers fear that if the wrong technology is chosen, we could end up with a state - even a democratic one - that knows your identity, your income and your transactions, holding even more power over your life.
The researchers believe there are three key topics that should be included in any public debate relating to CBDCs.
This includes: which features of the CBDC would promote financial inclusion; how the CBDC can ensure a reasonable level of account and transaction anonymity; and how data generated will be processed, stored, and eventually destroyed.
Dr Andrea Baronchelli said:
Central Bank Digital Currencies have the possibility of being more financially inclusive by offering convenience and low transaction costs. However, this comes at the risk of our privacy which we don’t believe should be compromised. We are in a unique position to encourage policymakers to make good design decisions as early as possible - before bad features become entrenched.