Programmable CBDCs Gain Favor in China, but Face Resistance from Privacy Activists

The advent of programmable Central Bank Digital Currencies (CBDCs) has ignited apprehensions about compromised privacy and financial freedom, with increased surveillance and control at the forefront of concerns.

A whitepaper published by two prominent financial giants has expressed support for the implementation of programmable CBDCs in one of the world’s largest economic zones. However, the paper also raises significant concerns regarding privacy and financial autonomy. The Greater Bay Area (GBA) in China, which encompasses Guangdong, Hong Kong, and Macao, is specifically mentioned. With a population of 71.2 million, the region is an affluent area in South China, accounting for around 5% of China’s total population.

How Do Programmable CBDCs Work?

Programmable Central Bank Digital Currencies (CBDCs) are digital currencies with embedded programmable features, allowing authorities to track and monitor transactions, impose restrictions, and potentially limit individual financial autonomy. This raises concerns about privacy rights, personal liberties, and the potential for abuse of power. While these digital currencies offer potential advantages, such as increased efficiency and cost savings, their potential for control and surveillance must be carefully considered to ensure that individual privacy and financial freedom are not compromised.

Standard Chartered Bank China‘s report explores the transformative potential of CBDCs in the banking industry. It suggests that CBDCs could enable “programmable banking services”, allowing for automated banking services and the integration of traditional banking with other industries’ offerings and value chains. The report emphasizes the importance of conducting more research on CBDCs, particularly regarding privacy and freedom implications. The whitepaper proposes collaboration among governments, central banks, and the private sector to ensure the beneficial implementation of CBDCs.

The Greater Bay Area (GBA) is a region of China that includes nine cities and two special administrative regions. The GBA’s whitepaper suggests using a CBDC to connect merchants’ loyalty programs across the region. The CBDC would only be payable to selected merchants, facilitating a unified loyalty program across the GBA. This would make it easier for customers to earn and redeem rewards and would help merchants to increase customer loyalty. The use of a CBDC could also help to reduce the complexity and costs associated with implementing cross-border loyalty programs.

Do We Need to Worry About Privacy?

Frederik Gregaard, CEO of the Cardano Foundation, believes that programmable CBDCs do not pose a threat to our privacy. He told BeInCrypto earlier this year that “privacy is not the problem” with these digital currencies. He believes that the benefits of programmable CBDCs, such as increased efficiency, transparency, and security, outweigh any potential privacy concerns. And convinced that technology can create a more inclusive financial system, providing greater access to financial services for the unbanked. With the right safeguards in place, programmable CBDCs could be a powerful tool for financial inclusion.

The ECB and the UK have confirmed that their CBDCs will not support programmability. Users of the digital euro or pound will not have the ability to impose restrictions on their payment usage. The ECB and the UK will introduce CBDCs as digital versions of their fiat currencies, without programming or smart contracts. This decision is in contrast to other parts of the world, which have chosen to make their CBDCs programmable.

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