According to the CEO of the Cardano Foundation, privacy isn’t the big problem with CBDCs, and we all need to be a little more ambitious when thinking about their potential.
Central bank digital currencies (CBDCs) have been the hot new topic in crypto, banking, and fintech in recent years. However, they have not been without controversy, particularly among the crypto community.
Originally, cryptocurrencies were developed as a decentralized alternative to eliminate intermediaries, enhance transparency, and foster accountability. Unsurprisingly, many people are apprehensive about the possibility of governments adopting comparable technology, which could increase surveillance and centralize financial power.
BeInCrypto spoke to Frederik Gregaard, the Chief Executive Officer of the Cardano Foundation, the day after his appearance on Wednesday before the All Party Parliamentary Group on Crypto and Digital Assets, where he was invited to discuss CBDCs. The group, which is a voluntary association of parliamentarians, scrutinizes the work of the UK government and regulators.
A Bold Agenda
However, their primary focus was the upcoming UK CBDC, or “digital pound.” The project has also been known as “Britcoin.” The UK Government has not yet committed to its implementation. Gregaard was keen to stress that the current conversation around CBDCs needed to be broader and more ambitious.
“Yeah, I was provoking them quite dramatically and saying this is not a technology problem,” he told BeInCrypto. “This is a question of what the UK wants.”
On the official Bank of England website, the benefits of the digital pound look almost indistinguishable from those offered by mobile banking and contactless payments. The UK is already one of the world leaders in digital payments. Cash is rarely used, and contactless has been the norm in retail transactions since at least the mid-2010s. Barclays made contactless capability the default for new debit cards in the UK in 2014. HSBC, Natwest, and Lloyds Bank followed suit in 2015.
“The pound is already digital, so I don’t understand the discussion,” he said. “I’ve been here for 24 hours, and I have only been using my phone. I have not taken out a credit card. I’ve not been taking out cash at all. So you are quite digital already, you know?”
“Honestly speaking, I think it is basically a waste of time to go down that rabbit hole.”
Privacy Not the Issue With CBDCs
“I think a CBDC has a different scope than what you narrowly are talking about now with privacy. Privacy is not the problem. We can easily solve that cryptographically speaking. The real problem here is, can you do something which will really get adopted? And not just by the population here, but by all the counterparties you have around the world?”
In its consultation paper, released last month, to “support trust and confidence,” the UK government said that the digital pound would be subject to “rigorous standards of privacy and data protection.” The digital pound would be “at least as private as current forms of digital money.”
Payment Interface Providers would verify users but anonymize personal data before sharing it with the central bank. The government and the central bank would not have access to users’ personal data, except for law enforcement agencies, under limited circumstances, as with other digital payments and bank accounts.
“Let’s be very clear about what we compare against,” said Gregaard. “Look at the data which is being collected right now on our smartphones. And when we use our debit cards, and when we are being triangulated by Telco providers and all the CCTV cameras….” Gregaard gestured around him with a concerned look, alluding to the fact that London is one of the most surveilled cities on the planet.
“Me as a Swiss person, you know… this is very, very strange for me. So I think what we need to kind of talk about is, what are we comparing? Right?”
“I think you could do something amazing on a blockchain, which goes more towards bearer cash or a bearer asset—and preserving privacy. Or at least give you, as the user, the ability to control your privacy, which you don’t have today. And that’s where I’m coming from when I say privacy is not a problem. We can design it in such a way that you can own a lot of those data points yourself.”
Throughout the conversation, Gregaard emphasized the importance of thinking bigger, particularly in a regulatory sense. While acknowledging the macroeconomic turmoil of Brexit, Gregaard believes it has its upsides. “The [EU] discussions in Brussels are so colored. It’s so hard to satisfy in so many different directions.”
The UK Shouldn’t Follow the EU or the US
“[The UK] has been the hub for capital markets for a long, long time. You have a real opportunity to design something that really puts you on the landscape and then create jobs and growth. So why not take it?” asked Gregaard.
Last month, BeInCrypto revealed that the UK was actively choosing not to take the lead on crypto regulation. In Gregaard’s view, this is the wrong strategy.
“If you’re sitting and waiting on jurisdictions who are not very clear and very successful in what they’re doing, that’s bad. So if you’re really getting inspired right now by the European Union and by the US, I think your data points are the wrong ones. Where your data points should be is probably more towards Singapore or Switzerland,” Gregaard stated.
“The US and the European Union are very large markets. They might be able to change the complete agenda. But that’s not what they’re doing right now.”
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