Digital cash offers ‘cash-like privacy,’ but bank data breaches threaten users: BIS
BIS said that digital cash can achieve “cash-like privacy,” however, the technology isn’t yet production-ready due to risks such as bank data breaches.
The Bank for International Settlements (BIS) has stated that digital cash can provide "cash-like privacy," although the technology is not yet ready for real-world use due to risks such as bank data breaches. In its Project Aurum Phase 2 report, BIS highlighted the potential for bank data breaches to expose users' personal information, despite digital cash offering privacy properties akin to physical cash.
The BIS report, published on Tuesday, detailed how a privacy-preserving digital cash prototype was developed using the BIS's Aurum codebase. This prototype aims to strike a balance between anonymity and transaction transparency. BIS noted that while a breach in one bank could expose customer data, it would not reveal customer identities from other parties involved in the transaction.
The report suggests that compromising a validator alone would not expose end users' identities. The BIS also explored the technical requirements for creating a privacy-preserving central bank digital currency (CBDC). In 2023, Brazil's central bank released the source code for its CBDC pilot, leading to concerns about surveillance and control mechanisms embedded within the code that could allow freezing or reduction of user funds.
US President Donald Trump had also banned federal agencies from developing a CBDC in January, citing financial stability and privacy concerns.
Written by urgent.news from Cointelegraph's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
