The digital identity and privacy communities got confirmation from the near future that they don’t often get – and from the world’s two leading central bankers.
“It wouldn’t be anonymous,” US Federal Reserve Chairman Jerome Powell said of a notional US central bank digital currency. See the video here, about 90 minutes.
Powell was answering a question from the audience during a panel of five central bankers last week. The event was what passes for a conference between some of the top banking executives called to discuss the tokenization of finance.
The United States has not committed to creating a national digital currency, Powell pointed out, but if that happens, four conditions would have to be met.
“It wouldn’t be an anonymous bearer instrument,” he said. “We would seek to balance privacy protection with identity verification, which also needs to be done in traditional banks.”
Christine Lagarde, President of the European Central Bank, raised her hand after Powell to say the same thing in a little more detail.
The number one concern expressed by European Union citizens in polls about a digital euro, according to Lagarde, was privacy.
So a digital euro “wouldn’t be completely anonymous as is the case with banknotes, for example,” she said, “but there would be some level of disclosure, and certainly not at the level of the central bank”.
The EU plans to introduce a digital central bank euro next year.
Mairead McGuinness, EU finance commissioner, agreed with Lagarde, saying the desire for privacy should meet a state’s need to combat money laundering. The EU has also tightened anti-money laundering regulations for cryptocurrencies.
For a renowned profession elevating the hint to an art form, this was a moment of incredible clarity for anyone focused on a future with national digital currencies.
Privacy, of course, was one of Powell’s three other decisive conditions for the implementation of such a currency.
The instrument should also be intermediated and transferable, or interoperable.
Today, according to McGuinness, only 10 countries, including Nigeria, have digital currencies.
The International Monetary Fund said digital currencies are slowly gaining adherents in sub-Saharan Africa, but governments need to focus on building the necessary digital infrastructure and legal frameworks first.
AML | biometrics | central bank digital currency (CBDC) | digital identity | EU | financial services | identity verification | confidentiality | United States