Abstract/Summary

CBDCs create tension between the needs of individuals to have their privacy protected and the needs of governments to monitor transactions (crimes, tax evasion, money laundering). Through the exploration of the meaning of privacy and the CBDC ecosystem and architecture we posit that cash-like privacy in digital currencies is not technically possible as ultimately the authors of transactions are digitally findable. We explore several CBDC design models and advance that the most appropriate model should enable what we refer to as “technical privacy”, in other words a cryptographically layered CBDC where piercing of the digital veil could only occur by court order. We conduct this examination through the lens of the eNaira, Nigeria’s CBDC, which, despite legislatively enshrined privacy rights, has been programmed on software that can override such rights and concentrate control. Finally, we offer 5 preliminary recommendations that any government exploring CBDC initiatives should consider so that development principles of privacy are respected and protected.