All across the world, the number one concern about central bank digital currencies (CBDCs) is the erosion of financial privacy.
Polls in the United States, the United Kingdom, Canada, and other Western nations show that privacy and government overreach are top reasons for those who oppose CBDCs. The story tends to differ in developing nations like Nigeria and Indonesia, but privacy concerns were enough to cause Brazil’s central bank to delay its DREX CBDC initiative.
While Banco Central Do Brasil will continue to explore use cases and applications in the meantime, it said that privacy solutions it has tested “have not presented the necessary maturity to guarantee compliance with all legal requirements related to preserving citizens’ privacy, despite having evolved over time.”
The DREX CBDC uses a permissioned version of Ethereum’s Hyperledger Besu with multiple parties running nodes. Given the transparent nature of blockchains, the central bank has tested several privacy solutions, including Anonymous Zether and Ernst and Young’s Starlight, both of which utilize zero-knowledge proofs(ZKPs) and Parfin’s …