In the rapidly advancing realm of Central Bank Digital Currencies (CBDCs), Adella Toulon-Foerster, a legal practitioner and former president of LocalBitcoins, at the Proof of Summit 2023 event raised a point about the delicate balance between technological advancements and the preservation of human rights, particularly privacy.
Adella, with over two decades of expertise in the digital currency field, discussed the importance of scrutinizing the implications of CBDC legislation.
She stressed the need for a meaningful dialogue between the private crypto sector, legislators, regulators, central banks, and the wider public.
One of the fundamental concerns she highlighted is the potential threat to financial privacy posed by CBDCs. CBDCs are digital forms of central bank money widely accessible to the public and issued by central banks themselves.
This raises questions about whether central banks, as issuers and regulators, would be in direct competition with commercial banks, potentially leading to conflicts of interest.
Little decentralization to be eroded?
Adella pointed out that the traditional banking system, despite its well-known imperfections, offers a certain level of decentralization when it comes to financial reporting and record-keeping.
Multiple entities (banks) are responsible for various financial functions, reducing the concentration of power in a single authority.
She added that banks are responsible for reporting suspicious activities and currency transactions, offering a level of discretion.
In contrast, the centralization of these functions in CBDCs could pose significant concerns, as all financial data would be controlled by a single authority, which in this case is the Central Bank.
This centralization means that a single entity would have complete oversight and control over all financial activities within the digital currency system.
“So imagine a world where every financial transaction you make, from buying your morning coffee to paying your rent, is recorded and scrutinized by the Central Authority,” she said.
CBDCs, trust, privacy, and de-platforming
While CBDCs are often proposed as a means to enhance financial inclusion, she challenged whether they genuinely address the concerns of individuals who lack access to traditional banking services.
Many people avoid banks due to high fees, a lack of trust, or the desire for increased financial privacy. CBDCs may not necessarily resolve these issues.
Zooming into privacy, Adella said that CBDCs are a threat to privacy, which is one of the basic human rights. If this is tampered with, then there is no strong foundation for individual autonomy, freedom of thought and expression, and protection against discrimination.
Another likely scenario with CBDCs she pointed out is the risk of de-platforming and censorship, suggesting that open and free discourse can thrive in a climate where privacy is upheld.
De-platforming refers to the practice of removing an individual or group from an online platform or social media service. This can limit their ability to express their views and engage in public discourse.
Censorship involves the suppression of information, ideas, or expression by authorities or powerful entities. Privacy acts as a safeguard against unwarranted censorship. When individuals can communicate privately, they are less vulnerable to censorship efforts.
She urged the audience to engage actively in the legislative process surrounding CBDCs and other financial initiatives, emphasizing the need to keep an open mind about regulatory proposals while advocating for the protection of privacy as a fundamental human right.
