Janet L. Yellen is the Treasury Secretary of the US. Recently she delivered her speech on the policy of cryptocurrency. It focussed mainly on the central bank’s digital currency reputation and they’re concerning privacy risks. Governments worldwide grapple with cryptocurrencies’ huge growth implications. Various governments have also started to explore the central bank digital currencies development. This is because of increasing urgency. They also have a hope to revitalize and expand accessibility to payment infrastructure. They also want to ease payments across borders. Also, they want to maintain control of sovereign currency. But persistent concerns about central bank digital currencies confused policymakers. These were privacy concerns and it was the same as the central bankers.
The Crypto market is growing rapidly. Private sectors are attempting to develop cryptos. Global governmental efforts were there for launching a system for digital currency. It has aided to galvanize governments to work. It is to control all narratives, and hold authority. Also, acknowledge all possible effects of huge acceptance of crypto. Thus many keep on considering developing and implementing central bank digital currencies.
Growth of central bank digital currencies exploration
• It is a digital currency. Central bank digital currency has the backing of a central bank by which it is issued.
• Now 87 countries constitute more than 90 % of worldwide GDP. They are actively exploring this concept.
• Such projects range from the stage of research to implementation.
• There is powerful worldwide interest in aims. It includes making the financial systems strong and enforcing control of sovereign currency.
• They may be having all the potential to give some benefits to consumers.
• By allowing quicker and affordable payments and transactions across the border it happens. Also trade facilitation, aid disbursement, financial inclusion promotions, and worldwide economic integration.
Prospective value of the implementation of Central bank digital currency
• The prospective benefits have given rise to a series of activities.
• Already 14 countries are piloting central bank digital currencies.
• Recently the President of the US passed an Executive Order.
• It was related to cryptos.
• It included a vital call to action that was related to central bank digital currencies.
• It motivated cooperation among intra-government and international collaboration. Thus it created a potential US central bank digital currency.
• Recently Janet Yellen made a remark. A central bank’s digital currency may become a reliable money form, unlike physical money.
Consider risks before implementation
• Central bank digital currency offers benefits for not only central banks and governments. But also for individuals worldwide.
• They too pose huge risks that must be addressed by the public sectors. It must happen before implementing a big-scale central bank digital currency.
• All risks and challenges along with implementation costs. Also implications for all international financial systems. These are some of the concerns mentioned by experts.
• Recent activities in the US put attention to the biggest concern. It was about central bank digital currency acceptance. It is the privacy of users.
• It advocates for a digital dollar’s development. It was held by people on smart cards or personal devices.
• This act will never leverage any decentralized ledger for facilitating transactions.
• The lack of record may mimic the physical cash’s nature of privacy preservation.
• It will gird the privacy of users in a world where digital tracking is increasing.
Concerns about user privacy
• The user privacy concern present in the act got mentioned by another bill.
• It got directed to prevent the Federal Reserve from doing something. It was from developing any direct-to-consumer central bank digital currency. The federal government could use it as a financial surveillance tool.
• Regulators have argued about the proposals for any digital euro. They must consider the central bank’s digital currency’ privacy implications.
• It is compared to the digital Yuan of China. No such project of central bank digital currency raised concerns about user privacy.
• According to experts it can provide the government with huge access to data upon citizens. It will further allow state surveillance.
• US representatives repeatedly referenced the Chinese instance in their US cryptocurrency strategy discussion. They often criticized its prospect to curtail civil liberties.
Conclusion
Governments are responding to the increasing crypto prevalence. Central bank digital currency will be an important part of the discussion. Apart from this privacy concerns will also get considered. Every policymaker, regulator, and the central banker must work along with experienced professionals. They may be from the civil society, private sector, and academia. It should take place for developing evidence-based strategies. It will help in realizing all benefits and mitigating the risks of such systems.