In a recent update on June 24, the European Central Bank (ECB) released its first progress report on the development of a central bank digital currency (CBDC). The report emphasized the importance of privacy, with the ECB pledging to incorporate pseudonymization, hashing functions, and encryption features to safeguard against individual tracking through transactions.
Furthermore, the ECB’s CBDC framework prohibits payment service providers from using consumer financial data for commercial purposes without explicit consent from the individuals who generated the data.
The update also outlined methods for conducting offline transactions. It briefly mentioned the facilitation of direct offline transactions between parties without the need for a third-party intermediary. These payments would be settled directly on users’ payment devices, such as smartphones or upcoming “smart cards” that may rely on battery power or bridging relays to synchronize transactions with the CBDC blockchain.
The report concluded by setting a time frame for the Rulebook Development Group, which was established to finalize the first draft of the technical and regulatory CBDC framework. The ECB expects the group to deliver its final first draft by the end of 2024 after consulting with service providers, infrastructure builders, and the general public.
Privacy concerns and the preservation of fundamental human liberty remain significant issues surrounding the widespread adoption of CBDCs. The crypto community has expressed growing anti-CBDC sentiment, citing examples of state actors seizing individuals’ assets to suppress dissent. These instances highlight the potential control and government overreach associated with government-controlled blockchain currencies.
According to a 2023 report by Trezor, 73% of respondents expressed unease about the privacy implications of a CBDC and the unprecedented control it would grant governments over consumer behavior. Critics argue that these risks outweigh the benefits of CBDCs, especially when stablecoins are considered, raising questions about the necessity of central bank digital fiat and broader challenges with CBDC adoption.
In the United States, lawmakers and politicians are leading the opposition against CBDCs. Former President Trump has vowed to prevent the implementation of a CBDC, a stance that has become increasingly partisan. In May, the U.S. House of Representatives passed the CBDC Anti-Surveillance State Act, a bill that highlights the severe threats posed by centrally controlled digital currencies to liberty in open societies.