Privacy should be considered in ‘potential retail CBDC’ — Treasury official

Privacy should be considered in ‘potential retail CBDC’ — Treasury official

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Privacy and the ability to transact anonymously should be considerations in the design of a digital dollar, a US Treasury official has said.

On June 13, Treasury Department Under Secretary for Financial Institutions Graham Steele speak at a payments-focused conference in Texas about the Federal Reserve’s controversial FedNow system and central bank digital currencies (CBDCs).

Steele said a challenge from a Retail CBDC is to minimize illegal transactions while maintaining user privacy. He said considerations still need to be made about how to protect user anonymity:

“It is important that we consider the extent to which privacy and anonymity can be preserved and explore available technologies and methods, including privacy-enhancing technologies, to enable such protections in the design of any potential retail CBDC.”

In his remarks, Steele weighed the benefits and risks of a potential CBDC, saying it could promote a “competitive payment environment.”

On the other hand, a retail CBDC would be backed directly by the Federal Reserve and could provide a safer option for consumers during bank runs that could “disrupt private sector lending,” according to Steele.

He noted the recent banking crisis and said that “access to non-deposit alternatives outside the banking system may have changed the nature and speed of bank runs.”

He added that the United States “has not yet determined whether it will pursue a CBDC,” but a Treasury-led group is evaluating the implications of a possible CBDC in the country.

Steele said the assessment includes reviewing “policy objectives related to global financial leadership, national security and privacy, illicit finance and financial inclusion.”

Related: 7 central banks and the BIS continue to examine ongoing policy issues for retail CBDCs

at the Federal Reserve FedNow instant payment systemSteele believes that having multiple options for payment transactions “promotes choice and competition in payments”, which he believes will encourage the “development of new payment services and features” along with improving payment system resilience. .

FedNow has seen political pushback. Presidential hopefuls Robert F. Kennedy Jr. and Ron DeSantis are against the system claiming that it would pave the way for a CBDC that both claim will hand over to the government too much control.

In April, Federal Reserve Board Governor Michelle Bowman He said it was “hard to imagine” that a CBDC can be justified beyond use in “interbank and wholesale transactions.”

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