The Bank for International Settlements (BIS) released a recent survey detailing and addressing some of the concerns surrounding Central Bank Digital Currencies (CBDCs) when it pertains to privacy protection and data governance. 

The global central bank organisation surveyed over 3,500 participants querying them on their CBDC use cases and how likely citizens will be to engage with the digital currency depending on the level of privacy and protection they contain. 

The BIS revealed that “privacy protection is among the key features to consider in the design of CBDC” as data governance and privacy fears have mounted in conjunction with the rise of popularity and uptake over the last year. 

The BIS stated: “The main findings of the paper are as follows. First, the privacy-preserving variations of the CBDC design have significant effects on the willingness to use CBDC when respondents purchase privacy-sensitive products (e.g. psychiatric services, adult products). 

“Second, the willingness to use CBDC substantially increases with the provision of information about the privacy benefits of using it. 

“Finally, these effects vary with respondents’ trust in public or private institutions with regard to privacy protection and their demographic characteristics.”

CBDC projects have taken on a life of their own in the last two years as several juggernaut global economies such as Japan, India and Russia explore the potential of digital currencies via pilot projects.

Essentially a digital form of cash, many analysts have described CBDCs as a form of tokenised deposits issued by central banks that will co-exist with other forms of currency such as physical cash and digital fiat payments. 

To illustrate the surge of CBDCs, the BIS released another survey last July, revealing that almost 15 CBDCs will be in use by 2030 and that CBDC work has risen by 93%. 

However, despite the potential for CBDCs to rapidly accelerate the movement of payments, many critics have cited privacy concerns related to its blockchain environment with some of the more staunch opponents coming from the US. 

The US has been hesitant to explore CBDCs, with concern stemming from the Federal Reserve Governor Michelle Bowman, as she believes the benefits of them “remain unclear”. 

She said: “The potential benefits of a US CBDC remain unclear, and the introduction of a US CBDC could pose significant risks and tradeoffs for the financial system.”

The BIS report acknowledges that privacy and data protection are of the utmost importance when it comes to if and how users are willing to engage with the digital currency, finding that up to 60% of those surveyed would be reassured if these measures were bolstered 

The BIS report outlined: “Using a nationally representative sample of over 3,500 participants, we conduct a randomised online survey experiment to examine how the willingness to use CBDC as a means of payment varies with the degree of privacy protection and information provision on the privacy benefits of using CBDC. 

“We find that both factors significantly increase participants’ willingness to use CBDC by up to 60% when purchasing privacy-sensitive products. Our findings provide useful insights regarding the design and the public’s adoption of CBDC.”