Tech Insights??: CBDC opponents fear mass surveillance; - Amnon Samid, a pioneer in digital currency challenges this perception

Guneet Kaur Msc, MBA, CAFCA, CBCA?, CMSA?, SFC?

Editor at Cointelegraph | CBDCs Researcher | Web3 Educator | Author | Speaker | Finance | FinTech

Published Feb 4, 2024 at the second edition of CBDCs Express!

At the heart of the CBDC opponents' arguments is the assumption that CBDC will open the door to mass surveillance by letting central bankers track how people spend their money.

Amnon Samid , an expert in digitalization, tokenization, and quantum security, who was among the first to introduce a digital currency that grants traders control over their privacy, their money, and their data, rejects this notion.

He says that there is a lot of disinformation & misconceptions and even misinformation being spread by stakeholders, like technology vendors and advisory firms, that caused central banks to assume that there must be a tradeoff between ease of use, privacy, security, and accountability. He agrees that the inconvenience of using and leaving a trail that can easily be tracked may hamper the widespread adoption of CBDC, and claims that CBDC design choices that most central banks adopted so far, do not provide cash-like privacy, and people rightfully care about the State or intermediaries having information on their spending habits.

Amnon Samid, who was leading the BitMint team that designed and co-operated together with central and commercial banks the first-ever retail CBDC pilot that successfully passed banking stress tests, claims that CBDC CAN and SHOULD enable private bilateral payments, which will be MORE convenient for users, compared to any other payment rail, without being an enabler for illegal activities.

One misconception is that money which is issued by a central bank cannot provide privacy to traders, because it’s centralized minted. The simple examples are banknotes and coins, which are centrally issued and backed by the central bank, but are being traded in full privacy and anonymity.

CBDC. if well designed, can provide the same cash-like privacy, enabling users to enjoy the digitalization advantages alongside conducting private bilateral payments, in online mode, as well as in offline mode.

So where is the problem?

Well, first – people don’t want to trust ‘promises’ of central banks, like for instance, the UK HM Treasury that confirmed lately that if a digital pound were to be implemented, primary legislation would be introduced, and this would guarantee users’ privacy and control.?

To address people’s fear of CBDC being used for surveillance and control or harassment purposes, privacy must be guaranteed by technology.? Citizens will NOT trust the current solutions explored by central banks that ‘promise’ not to have access to any data (traders’ identities, transaction details, etc.).?

Second, technology vendors that don’t have the technical capability to offer cash-like privacy for CBDC, claim that a CBDC would not be much different from the practices governments already use to track spending. They admit that cash-like privacy is not provided by the current DLT-based solutions. All transactions are publicly accessible. While, AI-cryptanalysis will find, soon enough, the traders’ identities and quantum computers will do it in the future.

Samid agrees that due to smart-phone payments and digital commerce, corporations already collect and analyze the spending data of traders, and claims that one of the purposes of digital currencies in general, CBDCs in particular – is to address this specific issue, that derives from the wrong assumption that convenience overrides privacy fears. Samid agrees that so far, the challenge of a cash-like private payment platform with CBDC at scale has not been addressed by any central bank. He claims that a public ledger, which is not a DLT, can regain cash-like privacy for traders to fulfill people’s desire for privacy to enjoy the convenience of digitalization and ensure accountability. While privacy and quantum cyber security should be guaranteed by technology as a design choice from day one, and NOT as an addition ‘on the go’ – like is being suggested by several technology vendors.

That said, the prospect is brighter than it looks, provided that central banks will not ignore existing solutions that can provide cash-like privacy for CBDC, without being an enabler for illicit activities.??

We have witnessed two solutions:

Tourbillon project of the BIS, which is based on Prof. Chaum & Dr. Moser's concepts, is an important step in the right direction, although it provides privacy ONLY to the payer, does not support P2P, and is hanged on to the COMPLEXITY paradigm of cryptography, which may limit transactions scalability and may not be quantum-resistance for the long run.

The G20 shortlisted, among others in 2022, the LeVeL-Paying-Field developed by Prof. Gideon Samid, which is a distributed public ledger enabling a payor passing a transactable instrument of value to a payee, with no intermediaries, while leaving to the parties to adjust their privacy to their needs, up to cash-like privacy for both payer and payee, consistent with oversight accountability, and law enforcement, as well as enabling scalability and preserving highest security challenges, up to being quantum-resistant.?

Samid concludes, saying that CBDC design choices chosen by most central banks so far, indeed have the potential for surveillance, censorship, supervision, and detection and only pretend to provide privacy. Samid claims that this concern is well addressed by a value-based (a.k.a. token-based) digital currency that is created by a quantum-randomness source, which makes coin identity and coin value pattern-less, premised on unpredictability, while it is decentralized verified and exchanged, utilizing the LeVeL-Paying-Field that does not suffer from flaws of blockchain, being quantum-resilient, preserving cash-like privacy when two parties (human or devices) trade with digital money, whether CBDC or stablecoins. It’s cutting out a network of validators and intermediaries, while still not being an enabler for illicit activities, offering a much wider range of disruptive use cases and functionalities and accommodating the potential for high transaction volumes.

Source: https://lnkd.in/gZJArBVv

?? Join us ??

?? The Digital Tokenization Think-Tank,

shaping the future of money ???

[*] https://lnkd.in/db32iGgw