European Central Bank (ECB) releases first CBDC progress update

The ECB pledged pseudonymization and independent audits of the CBDC system to allay customer concerns about monitoring. In an update on June 24, the European Central Bank (ECB) presented its first progress report on building a central bank digital currency (CBDC). Privacy measures were a major priority, with the ECB guaranteeing pseudonymization, hashing mechanisms, and encryption capabilities to protect people from transaction tracking. Furthermore, under the ECB’s CBDC framework, payment service providers are prohibited from using consumer financial data for commercial purposes without first getting explicit agreement from the individual who generated the data.

Methods for conducting offline transactions were also discussed. The update briefly mentioned supporting offline transactions between parties without the requirement for a third-party middleman.

These payments would be resolved immediately on the payment devices used by consumers on smartphones and yet-to-be “smart cards” that might be battery-powered or rely on bridging relays to synchronize transactions with the CBDC blockchain.

The report concluded by outlining a timeline for the newly formed “Rulebook Development Group” to complete the first draft of its technical and regulatory CBDC framework. According to the ECB, the Rulebook Development Group will submit its final first draft by the end of 2024, following consultations with service providers, infrastructure builders, and the public.

The digital elephant in the room

Privacy concerns and fundamental human liberty remain top priorities for the broad usage of central bank digital currencies, while anti-CBDC sentiment grows throughout the crypto community.

During the recent Oslo Freedom Forum, speakers and attendees discussed many cases in which state actors unlawfully seized people’s assets to suppress opposition. These examples only sampled the control and government overreach that government-controlled blockchain currencies represent.

According to Trezor’s 2023 report, 73% of respondents were concerned about the privacy implications of a CBDC and the unprecedented control it would give governments over consumer behavior. Regarding stablecoins, critics believe that the risks outweigh the benefits of a CBDC. This raises concerns about central bank digital fiat redundancy and the broader issues surrounding CBDC adoption.

U.S. lawmakers take a stand

US lawmakers and politicians are spearheading the campaign against CBDCs. Former President Trump has vowed to block the establishment of a CBDC in the United States, a stance that has increasingly split along party lines. The CBDC Anti-Surveillance State Act, which highlights the significant threats posed by centrally controlled digital money to liberty in free societies, was passed by the United States House of Representatives in May.

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