US Treasury studying privacy for potential CBDC.

A Treasury official announced on Tuesday that the US Department of the Treasury is investigating privacy concerns surrounding the potential implementation of a retail central bank digital currency.

Graham Steele, the assistant secretary for financial institutions at the US Treasury, spoke about the pros and cons of a retail CBDC on Tuesday at the Transform Payments US 2023 Conference in Texas.

According to Steele, one of the challenges of a retail CBDC could be privacy.

Steele stated, “… it is important that we consider the extent to which privacy and anonymity might be preserved and explore the technologies and methods available, including Privacy Enhancing Technologies (PETs), to enable such protections in the design of any potential retail CBDC. Such technologies could play a crucial role in maintaining transactional privacy while also ensuring transparency and traceability, thus reinforcing the trust of users in digital financial transactions.”

Steele also emphasized that the US has not yet decided whether it will pursue a CBDC.

A retail CBDC could provide financial inclusion for the general public and “preserve the face value redemption of the currency,” but it could also destabilize private sector lending and cause privacy concerns, according to Steele.

Steele stated, “An additional challenge is protecting user privacy while minimizing risks of illicit financial transactions. Fulfilling both of these important objectives requires a careful balance in the design of any potential retail CBDC.”

Concerns around privacy

CBDCs have become a contentious issue in the US, with some government leaders seeking to ban them.

Florida Governor Ron DeSantis, who is now a Republican presidential candidate, signed a bill last month that prohibits CBDCs. Florida, according to DeSantis, was the first state to do so.

“The movement to establish a central bank digital currency is an attempt to surveil & control the finances of Americans. It would violate privacy, limit consumer choice & undermine market competitiveness,” DeSantis tweeted in March.

Republican Sen. Ted Cruz of Texas has also proposed banning the US Federal Reserve from issuing a CBDC and introduced a bill in March 2022 that would prohibit the Fed from developing a direct-to-consumer CBDC.

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