Central Bank Digital Currency is the Need of the Hour, but Privacy is the major Concern

Central bank digital currency (CBDC) is the future of finance that may replace cash soon. But before it applies on a mass level, its pros and cons are being discussed in the fintech world. User privacy is the topmost issue related to CBDC’s implementation.

The need for digital currency has been felt after the Coronavirus pandemic because of cash result in viral transmission. Moreover, CBDCs have also more benefits over fiat currencies, and it is also the demand of the tech-turned world.

The Chinese government is already experimenting with digital yuan and is expected to launch soon. China is at the forefront in recognizing the potential of digital currency. They are working on it from 2015, and recently, the National Council for Social Security reported that they have successfully designed the basic architecture of the digital yuan.

The United States is behind China in working over the digital dollar. The debate is going on among government officials about whether to distribute stimulus checks via electronic payments through the digital dollar.

Central bank digital currency differs from cryptocurrency in the sense that it is under the control of a central bank and is the replacement to the cash money. Last month, the US Senate Banking Committee has also invited prominent names in the crypto industry including Charles Cascarilla, the CEO of Paxos.

Besides China, several other countries have also started researching and experimenting with CBDCs.

Privacy Issue is a Threat for Citizens

Besides its rising popularity in the fintech space, the issue of privacy of the user’s personal finance is still there. The central bank can easily trace the money flow by a user that may raise a concern for citizens. So, the censorship of CBDCs by governments can be possible. Tone Vays said:

“These new digital dollars will still be confiscatable, and they will still be censored if the banks want them to be, so nothing changes. It’s all about the elimination of cash, and the sooner that happens, the sooner Bitcoin will shoot to the moon.”

Cryptocurrencies can be tracked by using the forensic tools provided by the crypto forensic firms. The possibility of tracing for CBDCs is more than cryptocurrencies.

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