Federal Reserve Governor Michelle Bowman says the adoption of a digital US dollar comes with challenges and tradeoffs despite the opportunities that the new financial system could bring.
During a speech on Tuesday, Bowman says that one of the leading concerns about the central bank digital currency (CBDC) is its significant risks to privacy.
“In thinking about the implications of CBDC and privacy, we must also consider the central role that money plays in our daily lives, and the risk that a CBDC would provide not only a window into, but potentially an impediment to, the freedom Americans enjoy in choosing how money and resources are used and invested.”
Bowman says that proper measures should be in place to safeguard the privacy of consumers and businesses. She says the system should also be transparent enough to deter criminal activities.
“We must ensure that consumer data privacy protections embedded in today’s payment systems continue and are extended into future systems.
So, a central consideration must be how a potential US CBDC could incorporate privacy considerations into its design, and what technology and policy options could support a robust privacy framework.”
She says privacy concerns will be easier to manage with wholesale CDBC whose use will be restricted to financial institutions than with retail CBDC, which will be accessible to the general public.
“The issue of privacy may be less difficult to address in the case of wholesale use cases, in which a CBDC would only be used by traditional financial institutions to conduct a limited range of financial market transactions. As with many of these considerations, the purpose and intended function of a CBDC has a major impact on its policy and design considerations.”
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The post A CBDC Could Pose Significant Risks to Privacy of Americans, Says Fed Governor – Here’s Why appeared first on The Daily Hodl.
