**Title: “CBDCs Claiming Privacy Focus: Potential Trojan Horses”**
**Author: Nicholas Anthony**
**Translated by: Chris, Techub News**
Nicholas Anthony, an analyst at the Cato Institute’s Center for Monetary and Financial Alternatives, has authored works such as “The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions” and “The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age.”
According to Nicholas Anthony, CBDCs claiming a focus on privacy may promise more than they can deliver. History demonstrates that even well-designed systems can swiftly morph into tools for extensive surveillance. Given governments’ and tech companies’ historical disregard for privacy, CBDCs might intensify financial monitoring rather than safeguarding user privacy.
Concerns have arisen regarding recently proposed “privacy-focused” CBDCs. Supporters of CBDCs rebut fears of heightened surveillance, asserting that “it just needs proper design” or “we just need a CBDC rights bill.”
While a “privacy-focused” CBDC sounds appealing in theory, its implementation might be too good to be true. Frankly, there is scant reason to trust the U.S. government to enact a “CBDC rights bill,” given its track record of undermining existing rights frameworks. From weakening financial privacy protections through third-party principles to failing to adjust reporting thresholds for inflation, the government has significantly eroded safeguards.
A historical precedent makes the risks of proposing privacy-centric CBDCs more tangible. Edward Snowden’s 2013 revelations exposed how domestic surveillance systems ballooned post-9/11. This includes a pertinent example for CBDC proposals. Former NSA official Thomas A. Drake shared a system proposal aimed at better safeguarding Americans’ domestic privacy within the NSA.
The proposal featured an opt-in monitoring system where all identifying information defaulted to anonymity. However, anonymity could be lifted and identities revealed under warrant. Drake presented this to NSA leadership, who showed no interest.
Later, it was discovered that elements of Drake’s proposal were implemented, albeit with the privacy protections for Americans stripped away. Essentially, what started as an attempt to create a limited surveillance system respecting Americans’ privacy inadvertently birthed one of the largest surveillance systems in U.S. history.
Supporters of CBDCs should heed this cautionary tale. The history of financial monitoring shows that even well-intentioned designs, akin to Drake’s NSA experience, can swiftly transform into something entirely different.
Chris Meserole, Director of Artificial Intelligence and Emerging Technology at the Brookings Institution, aptly remarked on the risks of CBDCs being used for monitoring and control in the U.S.: “I’m not concerned about an immediate slide down this path, but I am genuinely worried that once a CBDC is established, a significant event like a terror attack could suddenly create immense pressure to deploy the system for different security or criminal justice activities.”
Vitalik Buterin, co-founder of Ethereum, similarly issued warnings, admitting his initial optimism that CBDCs could combine the transparency, verifiability, and privacy of cryptocurrencies was naive. Post-CBDC system development, these protections “begin to evaporate.”
Buterin asserts, “The systems we end up with [CBDCs] are actually not much better than existing payment systems, essentially just different front-ends for existing banking systems, further compromising privacy and simultaneously breaking down existing barriers for corporations and governments.”
These concerns are hardly surprising. Central bank leaders worldwide, including Federal Reserve Chair Jerome Powell, Bank for International Settlements General Manager Agustín Carstens, European Central Bank President Christine Lagarde, and Bank of England Governor Andrew Bailey, have repeatedly affirmed that anonymity and full privacy in CBDCs are unattainable.
Considering such high risks and minimal benefits, this path may be best left unexplored. CBDCs are ill-suited to aid financial inclusion, too late to significantly improve payment speeds, unlikely to advance monetary policies, and ineffective in maintaining the dollar’s status as the world’s reserve currency. Given these points, it is undoubted that governments likely seek CBDCs to solidify their control over currency amidst the rise of cryptocurrencies.
It is almost unquestionable that the organizations pushing for CBDC adoption, driven by vested interests, might unwittingly turn “privacy-focused CBDC” proposals into mere “wolves in sheep’s clothing.”
