The Bank of England has published a technology working paper wherein it lays out its ideas on a future digital pound. User privacy is being considered.
Central Bank Digital Currencies (CBDCs) are the future of financial transactions according to most central banks and governments across the world. More than 100 central banks are in various stages of their development.
The Bank of England has just published a technology working paper which does appear to allay some of the fears that CBDCs could be used to control spending habits and also ‘switch off’ from the system anyone who might be considered by the government as being in contravention of rules or politics.
In fact, according to the working paper, the bank will not program the CBDC to “restrict its use”, but will only do so in order to “give users greater functionality”.
“The Bank will not pursue central bank-initiated programmable functions. This means that the Bank will not program CBDC to restrict its use. But PIPs could, with user consent, implement programmability features which are designed to give users greater functionality from their wallets and CBDC holdings. These could include automated payments or programmable wallets.”
Another element of the proposed CBDC is that of privacy. The European MiCA regulations don’t appear to acknowledge the need for privacy, but the BoE working paper looks to support it.
It explains what it means by “blind proofs” (zero knowledge proofs), which it says will enable users to hide their personal data, not just from any one they transact with, but even from the bank itself.
“ZKPs might also be used by a PIP to attest to completion of know your customer (KYC) checks without exposing personal data to the Bank and other ecosystem participants.”
This looks extremely promising so far if the bank does implement these structures into its CBDC. However, a question should be: Can the CBDC still be adjusted at some future point in order to negate an individual’s privacy, and could the programming be added which would gain more control over citizens? Verbal assurances should not be accepted.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.