• Tue. Oct 26th, 2021

The identity of people is the heart of national digital currencies


May 10, 2021

Since October 2020, the European Council has planned the development of a common regulatory framework for public and secure electronic identification (e-ID), including interoperable digital signatures. All with the aim of providing people with a unique online identity that also allows access to public digital services. The program predicts that 80% of EU citizens will be able to use an e-ID solution by 2030. An interesting article in the Financial Times tells, in parallel, how Goldman Sachs recently published a report on the state of the experiments around to the digital currencies of the US central bank which touches on the issue of identity and anonymity: “To avoid facilitating illegal activities, central banks have mostly decided against completely anonymous accounts and transactions without traceability”. What Central Bank Digital Currency (CBDC) research and trials are converging on is the realization that it will be nearly impossible to issue such currencies outside of a national digital ID management system. Which means: CBDCs will likely be tied to personal accounts that include data, credit history, and other forms of relevant information.There are a number of reasons for this, but the most important is that moral hazard is being played in this game. between the need for these currencies to be structurally designed as universal and accessible to all, regardless of our credit history or facts about us, and that of adhering to international anti-money laundering standards. If the system is universal it cannot discriminate, so in theory it could not even prevent support for illegal activities. Goldman explains in the report reported by the FT: “To solve this problem, central banks have mostly decided against the possibility of opening completely anonymous accounts or have limited the size of anonymous transactions. Governments have varying degrees of knowledge of transactions and have generally entrusted the burden of monitoring customers and CBDC transactions to commercial bank intermediaries. “The other risk is that of disintermediation by banks not only of control but also of movement and management of financial assets. Goldman notes in this regard: “Central banks are designing their CBDCs to set limits on total balances or to limit the degree to which customers can exchange existing deposits for CBDCs.” In essence, central banks work on currencies based on digital identity. But, at this point, it becomes central to ask questions: to whom we entrust our personal data for the construction of digital identity, how many people, how many entities, how many companies have control over it and, above all, what kind of non-monetary information should or shouldn’t Finally, the FT notes, it is unlikely that what works for authoritarian countries like China, which have the power to impose intensive surveillance-based monetary systems, will work the same for states like Britain or the USA. In Switzerland, for example, a referendum was recently produced precisely on the introduction of a potential national electronic identity system. The final results saw 64.4% of voters declare against the program. However, opposition to the proposal was not so much promoted around the total rejection of an electronic identification system as the idea that identification can be handled by private companies and not by the government under full democratic supervision. A public debate on this issue has not yet started and the risk is that the new monetary systems can be imposed from above without the necessary social confrontation.