IMF Admits In Paper CBDCs Would Allow Personal Data To Be Collected And Stored And Provided To Police, Creating Surveillance State

IMF Admits In Paper CBDCs Would Allow Personal Data To Be Collected And Stored And Provided To Police, Creating Surveillance State

Jacob M. Thompson

“CBDC data allows for commercial exploitation while also raising the possibility of state surveillance,” the IMF said. 

The International Monetary Fund (IMF) has disclosed in a new report discussing the safety risks surrounding central bank digital currencies (CBDCs) and fears people have about them. In it’s report, the IMF concedes that a central bank could collect a plethora of private data and could even overturn this information to authorities, acknowledging some of the animosity those critical of CBDCs have had about them. 

Published on August 30th, the IMF’s paper – “Central Bank Digital Currency Data Use and Privacy Protection” – “offers a framework to help countries navigate, as well as tools to help them manage, the trade-offs between CBDC data use and privacy protection,” the IMF says.

The IMF begins its report immediately explaining how retail CBDCs contain all sorts of information when a transaction occurs, and therefore can be leveraged by central banks and other entities for themselves, and could be overturned to government authorities and police for potential crimes depending on national policies. The IMF wrote:

Central bank digital currency (CBDC), as a digital form of central bank money, may allow for a “digital trail”—data—to be collected and stored. In contrast to cash, CBDC could be designed to potentially include a wealth of personal data, encapsulating transaction histories, user demographics, and behavioral patterns. Personal data could establish a link between counterparty identities and transactions.

The authors later defined exactly what the data collected is. This includes the payer’s/payee’s identity, payer’s/payee’s pseudonymous identifiers (account number or token address that belongs to, or is controlled by, a counterparty), transaction data, and other and payer and payee transaction metadata (merchant’s name, purchase location, and spending category).

The authors go on to write: 

Furthermore, CBDC data use could help central banks achieve policy objectives. It could help reduce information asymmetries, potentially assist in supporting financial inclusion, facilitate payment system interoperability, and promote innovation and market contestability. It could provide more timely information about the state of the world and help improve macroeconomic policymaking and regulatory compliance. 

Data use by central banks differ from that of law enforcement and national security authorities, which may be vested with powers under national legal frameworks to lawfully access personal data. If permitted by the relevant laws, CBDC data use could allow for increased traceability for such authorities to track or prevent illicit and fraudulent activities.

If poorly designed or managed, CBDC personal data use could pose risks to privacy, arising from events such as data leakages, data abuses, cyberattacks, and cross-border payments data flows, thus also negatively affecting CBDC adoption. Indeed, technology alone cannot ensure privacy protection. For instance, even anonymized transactions can be reidentified and the data can be de-anonymized with metadata.

While many privacy concerns are already apparent in existing digital payment systems, CBDCs could present new challenges. CBDCs could be perceived as an instrument for state surveillance. Some may worry that the government or the central bank could use it to control or restrict payments users can make with CBDC, thereby undermining public trust in central bank money.

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