Digital Currency News

Privacy Matters for CBDCs

Uniquely amongst payment options, cash offers people payment privacy. A key part of debate about Central Bank Digital Currencies (CBDCs) is about the extent to which a CBDC can mimic the privacy achieved by cash. A new Bank for International Settlements (BIS) working paper considers designing CBDCs for privacy protection and data governance.

A representative sample of 3,500 people in Korea were surveyed to understand how their willingness to use a CBDC changed as the degree of anonymity and privacy protection varied. The survey also measured whether people’s willingness to use a CBDC changed as they became aware of the privacy benefits that could be designed in to a CBDC.

The study confirmed that when CBDCs are designed to preserve privacy, there is a significant increase in people’s willingness to use CBDCs. For sensitive products, for example psychiatric services and adult products, the increase was up to 60% more. When people were informed about the privacy measures in place, again, the willingness to use CBDCs significantly increased.

Two factors influenced people’s willingness to use CBDCs in regard to privacy protection. First, the respondent’s trust in public or private institutions and second, their demographic characteristics.

Mastercard Questions Logic of CBDCs

Mastercard’s Asia-Pacific lead for blockchain and digital assets has spoken about CBDCs in the region. He argues that consumers are so comfortable with existing payment options, that a CBDC is not justified. Adoption will, therefore, be the key challenge for CBDCs. He does suggest one caveat. In countries where the domestic payment system is not robust, a CBDC may well make sense.

For a CBDC to work, people will need to be able to spend it anywhere they want, as cash can be today.

Digital Tenge Debit Cards Launched in Kazakhstan

The National Bank of Kazakhstan started its pilot CBDC project in June 2021. In 2022, it tested its Digital Tenge in the real world environment, and 2023 and 2024 are being spent exploring use cases for the Digital Tenge beyond just being used for retail payments. The first public issuance of a Digital Tenge is planned for late 2025.

In this context, Kazakhstan’s Eurasian Bank has launched a Digital Tenge Card in collaboration with Mastercard to enable consumers to make purchases using the country’s CBDC. For the user the payment experience is simple, the debit card converts Digital Tenge held in accounts to the traditional Tenge currency that is then used on existing payment rails in-store and online. Merchants don’t have to change their infrastructure and the usual fraud and security payment guarantees enjoyed with any Mastercard card payment exist.

Eurasian bank anticipates the next stage of the partnership to be wallet openings, QR transfers and loyalty programme tokenisation.

Visa has also launched a Digital Tenge payment card in collaboration with the National Payment Corporation of Kazakhstan (NPC), HalykBank, CenterCredit Bank and AltynBank.

The new Visa-based Digital Tenge payment cards can be used anywhere Visa cards are accepted. CBDC cards will be available to NPC employees in the first step of adopting digital tenge.