CBDC’s Privacy Emphasized in Israel, Questioned in England

• Israel’s central bank’s decision to launch a digital shekel is still uncertain, but emphasizes privacy advantages.
• The UK’s Bank of England is considering a digital pound but is concerned about privacy issues.
• BoE Deputy Governor Sarah Breeden calls for a “national conversation” to address privacy concerns and gain public trust.

In two different parts of the world, the digital currency landscape is under scrutiny due to concerns surrounding user privacy. While Israel’s central bank contemplates a digital shekel, emphasizing privacy advantages, the Bank of England (BoE) seeks to address public concerns over the privacy implications of a digital pound.

Israel’s central bank has been actively exploring the possibility of introducing a digital shekel to enhance the country’s payment systems. However, the Bank of Israel Governor, Amir Yaron, emphasized that the decision to launch a central bank digital currency (CBDC) is still an “open question,” mirroring the approach taken by many advanced economies.

Nonetheless, Yaron stressed that if a digital shekel is introduced, “it will provide at least as much privacy as digital means of payments,” if not more. Deputy Governor Andrew Abir supported the idea and suggested exploring the possibility of remunerated CBDCs, where central banks pay interest directly to end users, with a focus on security.

On the other hand, the United Kingdom’s central bank, the BoE, is considering the introduction of a digital pound but is grappling with concerns about privacy. Critics argue that a digital currency could be exploited by governments for surveillance purposes, potentially undermining privacy.

Incoming BoE Deputy Governor Sarah Breeden told at a hearing of Parliament’s Treasury Committee on Tuesday that there is a need for a “national conversation” to address these concerns and reassure the public. “While I am supportive and see its [CBDC’s] merits, it was apparent in the responses that we got to the discussion paper that there is a lot of concern about privacy,” she said.

Breeden highlighted the importance of managing privacy challenges, saying, “We must not assume trust in practice. We need to demonstrate that whatever parliament has decided [on privacy] is the right boundary and one that we will deliver.” Breeden also called for an equal focus on privacy concerns in the private sector’s digital currencies.

Similarly, the adoption of the digital euro, a project initiated by the European Central Bank (ECB) in 2020, is facing difficulties due to setbacks in the crypto market. The digital currency faces concerns about privacy and exclusion of certain populations, like senior citizens, which make the transition from fiat currency challenging.