CBCDs offer traceability — but that comes at a cost to consumers, the city’s mayor says. Stablecoins pose a risk to governments.
Central bank digital currencies threaten consumer privacy, London Lord Mayor Michael Mainelli told an event organized by digital pound enthusiasts on Wednesday.
CBDCs can fight financial crime because payments are traceable, and monitoring of transactions can be automated — but there’s a dark side, Mainelli said.
That transparency “equally means a loss of privacy,” he said. “I’m sorry – you can’t have both.”
His comments come as CBDCs are a loaded topic globally. While governments hail them as a welcome solution in an increasingly cashless world, critics see CBDCs as a threat to people’s privacy.
Digital Pound Foundation
Mainelli is not to be confused with London Mayor Sadiq Khan. Instead, Mainelli’s role as head of the City of London Corporation will be that of an ambassador to the UK’s larger business and financial community.
Mainelli spoke at an event organized by the Digital Pound Foundation, which promotes CBDCs, stablecoins and tokenization.
Finding money is nothing new, Mainelli said. Paper money is also printed with individual serial numbers.
But with CBDCs, governments can track the movement of money at every point.
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The idea of governments having unprecedented insight into consumers’ financial lives alarmed libertarian-leaning politicians in the US. They compared them to a Chinese Communist Party-style surveillance regime.
Republican presidential candidate Donald Trump has called the introduction of a digital dollar a “dangerous threat to freedom.”
More moderate critics say governments can monitor consumer spending and implement targeted taxes to fulfill policy agendas, punishing citizens for buying fast food or cigarettes.
Proponents of digital currencies, however, say privacy can be baked into the design of CBDCs — for example, by applying technology like zero-knowledge proofs.
In addition, they provide an opportunity for the private sector to provide consumers with convenience and innovative payment services.
Without a CBDC, governments fear that citizens will opt for stablecoins issued in other countries’ currencies, threatening the stability of their own money.
Fintechs are already integrating stablecoins into their payments infrastructure.
Payments giant PayPal launched its own stablecoin, Stripe announced a $1.1 billion acquisition of Bridge this week, and firms like Rebellion and Robinhood Said to be exploring launching their own stablecoins.
Tech Genie
About half of the world’s central banks Examining A retail CBDC and some countries – including India, China and Jamaica – have piloted one.
The UK government consulted on the so-called “” concept.Britcoin.” In their findings, published earlier this year, respondents said privacy was a primary concern and that laws should be written to guarantee consumer privacy and control.
“Despite our assurances [from the government]The energy will still be there,” Mainelli said.
The government could introduce a temporary override of this privacy overlay in an emergency — a terrorist attack, say — and then never revoke it, he said.
“It’s hard to put technology back in the bottle,” he said.
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