EU, US central banks see national digital currencies only if privacy balanced by security
The digital identity and privacy communities got some confirmation about the near future that they do not often get — and from the world’s top two central bankers.
Powell was responding to a question from the audience during a panel of five central bankers last week. The event was what passes for a confab among some of the top-most banking leaders called to discuss the tokenization of finance.
The United States has not committed to creating a national digital currency, stressed Powell, but were it to happen, four conditions would have to be addressed.
“It would not be an anonymous bearer instrument,” he said. “We would be looking to balance privacy protection with identity verification, which has to be done in traditional banking as well.”
Christine Lagarde, president of the European Central Bank, raised her hand after Powell to say the same thing in slightly more detail.
The first concern European Union citizens told pollsters about a digital euro, according to Lagarde, was privacy.
So, a digital euro “would not be complete anonymous as there is with bank notes, for instance,” she said, “but there would be some level of disclosure, and certainly not at the central bank level.”
The EU plans to introduce a central bank digital euro next year.
Mairead McGuinness, the EU’s finance commissioner, agreed with Lagarde, saying the desire for privacy would have to accommodate a state’s need to fight money laundering. The EU has also been increasing anti-money laundering regulation for cryptocurrencies.
For an occupation renowned raising the hint to an art form, it was an amazing moment of clarity for everyone focused on a future with national digital currencies.
Privacy protection, obviously, was one of Powell’s other three make-or-break conditions for implementing such a currency.
The instrument would also have to be intermediated and transferrable, or interoperable.
Today, according to McGuinness, only 10 nations, including Nigeria, have digital currencies.
The International Monetary Fund has said that digital currencies are slowly gaining adherents sub-Saharan Africa, but that governments have to focus on the need to first build required digital infrastructure and legal frameworks.