‘Potential retail CBDC’ should take privacy into account, says a Treasury official

By Clark

Graham Steele, a representative of the U.S. Treasury, advised attendees at a Texas payments conference that a future CBDC in the United States should take privacy into account.

According to a representative of the US Treasury, the design of a digital dollar should take into account privacy and the capacity for anonymous transactions.

Graham Steele, assistant secretary for financial institutions at the Treasury Department, discussed central bank digital currencies (CBDCs) and the contentious FedNow system during a June 13 speech at a payments-related conference in Texas.

A retail CBDC’s struggle, according to Steele, is to reduce unlawful transactions while upholding customer privacy. He stated that there should still be thought given to how to safeguard user anonymity:

In order to provide such protections in the architecture of any prospective retail CBDC, it is crucial that we take into account the degree to which privacy and anonymity may be retained and investigate the technologies and approaches available, including Privacy Enhancing Technologies.

Steele assessed the advantages and drawbacks of a potential CBDC in his remarks, noting that it might foster a “competitive payment environment.”

A retail CBDC, on the other hand, would be directly backed by the Fed and might offer customers a safer alternative during bank runs, which, in Steele’s words, could “destabilise private sector lending.”

Using the recent banking crisis as an example, he claimed that “access to non-deposit alternatives outside of the banking system may have changed the nature and speed of bank runs.”

He noted that although a Treasury-led group is analysing the ramifications of a potential CBDC in the nation, the U.S. “has not yet determined whether it will pursue a CBDC.”

According to Steele, the assessment looks at “policy objectives related to global financial leadership, national security, privacy, illicit finance, and financial inclusion.”

When it comes to the Fed’s FedNow rapid payment system, Steele feels that having a variety of payment methods “promotes choice and competition in payments,” which will, in turn, spur the “development of new payment services and features” and improve the robustness of the payments system.

Politicians have responded negatively to FedNow. Candidates for president Ron DeSantis and Robert F. Kennedy Jr. are opposed to the system because they believe it will pave the way for a CBDC, which they both believe will give the government excessive authority.

Michelle Bowman, governor of the Federal Reserve Board, stated in April that it was “difficult to imagine” that a CBDC could be justified for anything other than “interbank and wholesale transactions.”


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