European Central Bank releases first CBDC progress update

The European Central Bank (ECB) released its first progress report on developing a central bank digital currency (CBDC) in a June 24 update.

Privacy provisions were a main focus, with the ECB promising pseudonymization, hashing functions, and encryption features as bulwarks against tracking individuals by transaction.

Additionally, under the ECB’s CBDC framework, payment service providers cannot use consumer financial data for commercial services without first obtaining explicit consent from the individual who generated that financial data.

Methods for conducting offline transactions were also outlined. The update briefly touched on providing support for offline transactions directly between parties without needing a third-party intermediary. These payments would be settled directly on the payment devices employed by users on smartphones and yet-to-be “smart cards” that may be battery-powered or rely on bridging relays to synchronize transactions to the CBDC blockchain.

The cover page for the ECB’s first CBDC progress report. Source: European Central Bank.

The report concluded by providing a time horizon for the newly established “Rulebook Development Group” to finalize the first draft of its technical and regulatory CBDC framework. According to the ECB, the Rulebook Development Group will deliver its final first draft by the end of 2024 after consulting with service providers, infrastructure builders, and the general public.

Related: Iran to launch public CBDC pilot in June.

The digital elephant in the room

Privacy issues and fundamental human liberty remain top concerns regarding the widespread use of central bank digital currencies, as anti-CBDC sentiment continues to grow within the crypto community.

During the recent Oslo Freedom Forum, speakers and attendees examined several instances where state actors unduly seized the assets of individuals to crush dissent. These examples were presented as just a taste of the control and government overreach posed by government-controlled blockchain currencies.

According to a 2023 report from Trezor, 73% of respondents expressed unease with privacy issues posed by a CBDC and the unparalleled control it would grant governments to control consumer behavior.

Critics argue these risks far outweigh the benefits of a CBDC when stablecoins are considered. This raises questions about the redundancy of central bank digital fiat and broader problems with CBDC adoption.

U.S. lawmakers take a stand

U.S. lawmakers and politicians are leading the charge against CBDCs. Former President Trump has vowed to prevent the implementation of a CBDC in the United States, a position that has increasingly fallen along party lines.

In May, the U.S. House of Representatives voted in favor of the “CBDC Anti-Surveillance State Act,” a bill highlighting the extreme dangers posed by centrally controlled digital money to liberty in open societies.

Magazine: The truth behind Cuba’s Bitcoin revolution: An on-the-ground report.

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