Could a Digital Dollar Compete on Privacy? Fed Chairman Powell Hints It Might
(Source: coindesk.com)

clicks | 6 days ago | comments: discuss | tags: cryptocurrency


Article preview (bot search)

(Original link: coindesk.com)

Please consider using a different web browser for better experience. Please enable JavaScript in your browser for a better site experience. Could a Digital Dollar Compete on Privacy? Fed Chairman Powell Hints It Might Feb 13, 2020 at 00:15 UTC Jerome Powell image via Federal Reserve Marc Hochstein Could a Digital Dollar Compete on Privacy? Fed Chairman Powell Hints It Might Federal Reserve Chairman Jerome Powell has given advocates of financial privacy a glimmer of hope – and hinted at how the U.S. might competitively position a future digitized dollar. In testimony before Congress this week, Powell was asked whether the Fed had any “visibility” into China’s progress developing a central bank digital currency (CBDC). “Yes, we certainly have that,” Powell said. “But they’re in a completely different institutional context. For example, the idea of having a ledger where you know everybody’s payments, that’s not something that would be particularly attractive in the United States context. It’s not a problem in China.” These were welcome words to those spooked not only by authoritarian China’s approach but also the potential privacy risks posed by Libra, the proposed digital currency originated at Facebook, a company that has paid billions in fines for abusing customer data. “Powell implied that any digital currency implemented in the U.S. would have to be privacy-preserving or privacy-respecting, and not provide another method of surveillance ala the Chinese government’s plans for a CBDC that provides the government with a backdoor to surveil transactions,” said Elizabeth M. Renieris, a fellow at Harvard University’s Berkman Klein Center for Internet & Society. “This should be reassuring to Americans who otherwise find themselves increasingly at risk of widespread government surveillance through their mobile location data, facial recognition systems, and law enforcement access to social media activities,” Renieris said in an email. Rainey Reitman, chief program officer at the Electronic Frontier Foundation, similarly approved of Powell’s acknowledging “the very real risks of attempting to create a state-run cryptocurrency here in the United States." "Records relating to your financial transactions can hold clues to everything from your medical conditions to your political affiliations to your location at a given time,” Reitman said in an email. “As we look at cryptocurrencies and an overall societal shift toward digitizing our financial transactions, it's vital that we build privacy values into both the technology and the regulatory systems.” Proceeding cautiously To be sure, Powell indicated that the Fed is still in the early stages of researching digital currencies, and was noncommittal on whether the central bank would ever issue one. “Having a single government currency at the heart of the financial system is something that has served us well. It’s a very, very basic thing, it really hasn’t been in question, and I think before we move away from that, we should really understand what we’re doing,” he said. “Preserving the centrality of a central, widely accepted currency that is accepted and trusted is an enormously important thing.” This was consistent with his prior remarks, as recently as December, which came as another relief for Renieris. “Realistically, this means it may be many more years before the Fed reveals any details of its research and development on a digital dollar to date, as we hope there would be many rounds of public consultation before any kind of official announcement or rollout,” she said. “That is, unless we really do go the way of China and implement this top-down.” Selling point But Powell was not the first Washington veteran to bring up privacy in the context of a potential digital dollar. Christopher Giancarlo, the former chairman of the Commodity Futures Trading Commission (CFTC) and now an advocate for an electronic greenback, touted U.S. constitutional protections as a differentiator. In a recent video interview with CoinDesk, Giancarlo described a scenario where a digital dollar was competing against an electronic yuan and against Libra. “One government is going to want to know every transaction, especially transactions to political opponents, freedom movements,” he said on the sidelines of the World Economic Forum in Davos. “One of those operators is going to want to know every commercial transaction to know whether you're shopping with Target or you're shopping with Nordstrom. And one of those providers is going to be constitutionally restricted from collecting either of that information. And that one is going to be the U.S. government.” Hence, “people could see a [U.S] digital dollar as your information being more secure, not less, than a central bank currency offered by other governments or commercial vendors,” Giancarlo said. The race is on China kicked its work on a digitized yuan into high gear last year following the unveiling of the Libra project, which Beijing offici...