BIS Says CBDCs Can Match Cash-Like Privacy, but Aren't Yet Ready for Commercial Use

The Bank for International Settlements said central bank digital currencies, or CBDCs, can provide privacy protections comparable to cash. Still, security issues must be resolved before the technology can be used commercially.

Cointelegraph reported on October 13 that the BIS, in its Phase 2 report on Project Aurum released the same day, said "CBDCs can achieve a level of privacy similar to cash" but that "the relevant technology is not yet ready for commercial use."

The study was conducted to test ways to apply privacy-preserving technology to CBDCs. Using its existing Aurum system, the BIS built a digital cash prototype that protects user anonymity while allowing verification of information needed to process transactions.

The study found that if a specific bank's system is compromised, the personal data of that bank's customers could be exposed. However, the identities of customers at another bank used by the transaction counterparty would not be revealed. Even if only the transaction verification system were breached, identifying end users remained difficult.

The BIS said the findings show digital cash can preserve privacy, while also highlighting unresolved challenges including the risk of data leaks at banks.