Central bank-issued digital currency threatens privacy – BoI official

A central bank digital currency could raise serious ethical challenges, a deputy governor from the Bank of Italy said in a speech on June 7.

A CBDC, Fabio Panetta told an audience in Milan, has been proposed by many countries as the use of digital payment means increases. But he said a question mark remains over whether a CBDC should have the same anonymity as its physical counterpart.  

“We need to think carefully, right now, about how to make the introduction of a CBDC fully compatible with the rights of individuals,” Panetta says.

Cash transactions leave no trace, says Panetta, which “ensures privacy for its users”.

Panetta is concerned a traceable form of CBDC would have “important economic and ethical implications” for consumers.

“Imagine for a moment that payments data suggested that spending on alcohol and the probability of defaulting on a loan are positively correlated,” he says.

Banks might, as a result, decide to reject applications for loans from applicants with a high expenditure on alcohol, Panetta says. They might do this “even though the correlation does not reflect any ex ante causal relationship between these two variables.”