Cyberattacks, loss of privacy and risk of bank runs are among the pitfalls central banks need to consider before issuing digital currencies, according to a Canadian think tank.
Much of the world was swept up in cryptocurrency fever through much of 2017.
And while Bitcoin’s value has fallen from about $25,000 to less than $7,000 per unit since then, the potential for digital currencies to shake up incumbent financial systems hasn’t dissipated.
“Policymaking circles and central banks around the world are now giving serious consideration to the pros and cons of making central bank digital currencies (CBDCs) available to the general public,” former Bank of Canada deputy governor John D. Murray wrote in an April 9 commentary for the C.D. Howe Institute.
“While the consensus view remains that such a move would be premature, opinion appears to be shifting. Indeed, developments in a number of advanced and emerging economies indicate that the CBDC model is receiving more serious consideration than it has in the past.”
Murray likened digital tokens issued by central banks to banknotes that would serve as legal tender but would function more akin to debit cards on commercial bank accounts.
However, he said central banks should be aware of concerns that the demise of cash could be interpreted as a threat to privacy.
“It could give the government access to vast amounts of personal data and increase the likelihood of slipping into a Big Brother world. The risk of political interference might also be much greater,” Murray said, adding those concerns ignore the fact that much of that information is already available to government and the private sector.
