- Jerome Powell has confirmed that a U.S. CBDC will not be anonymous
- Powell told a Banque de France conference that “identity verification” will be used in any design
- He added that the Fed has not yet decided whether it will proceed with a CBDC
Federal Reserve Chairman Jerome Powell yesterday confirmed that a U.S. Central Bank Digital Currency (CBDC) would not be as anonymous as cash, confirming the fears of privacy advocates. Powell was speaking at an event hosted by the Bank of France on Tuesday when the subject of a CBDC came up, with Powell responding that identity verification would be baked into the design. This suggests that the proposed Ecash digital currency, which was put forward in March and retained similar privacy rights to a paper dollar, will never see the light of day.
Privacy is a Huge Cause for Concern
Conversations over the look and feel of a potential U.S. CBDC have always been loose and vague, showing that a decision is still far off. The main sticking point has always been the level of privacy afforded to holders, with many rightly worried that the new digital currency will erode the privacy offered by using paper cash.
These concerns have manifested themselves into an alternative to the loosely proposed currency through Ecash, a system put forward earlier this year by four bi-partisan representatives for a system that would be digital in nature but would be the sole preserve of the owner, with no influence, or tracking, possible by any authorities.
It would be issued by the Treasury rather than the Federal Reserve and transactions would not be monitored, allowing holders to use and spend their money like cash but with the convenience of having it on their phone, and with no additional checks applied.
CBDC Will Not be “Anonymous Bearer Instrument”
However, it seems that these plans could be dead in the water after Powell confirmed yesterday in response to a question over a potential CBDC, “It would not be an anonymous bearer instrument.” This simple summary represents a nail in the coffin for privacy advocates who fear that cash will be replaced by a system where their usage is traced. Powell was noncommittal on many aspects of a U.S. sovereign stablecoin, going only as far as saying one of the elements would be “identify verification”.
Powell reinforced the message that cash is not disappearing however, and when pressed on a timeframe said, “We have not decided to proceed and we don’t see ourselves making that decision for some time.” It seems, then, that privacy advocates are safe…for now.