Document Type
Article
Publication Date
2024
Abstract
Many have voiced concerns that a digital dollar, a digital form of central bank money, will facilitate government surveillance, thus depriving users of privacy. Contrary to popular belief, this Article investigates critical technical designs proposed by leading think tanks, central banks, and scholars from interdisciplinary fields, it reaches a surprising conclusion: a digital dollar can offer better privacy protection than existing digital payment systems. The Article argues that those expressing concerns have made two flawed assumptions: (1) that the digital dollar data is fully transparent regarding personal information and transaction details, and (2) that the government or the Federal Reserve has unlimited access to this fully transparent data and the potential for their misuse. In reality, the designs directly oppose these assumptions by allowing for a certain degree of anonymity, whether it be payer anonymity, transaction anonymity, or a combination of both, and by preventing government access to identity data and transaction details. The real issue is that if the digital dollar adopts these privacy-preserving designs, it will directly conflict with existing anti-money laundering and countering the financing of terrorism (AML/CFT) regulations that require transparent data to combat financial crimes. Accordingly, this Article proposes changes to financial institutions’ record-keeping and reporting practices. It also suggests modernizing AML/CFT requirements to allow a certain degree of anonymity to protect privacy while still fulfilling public interest objectives such as combating money laundering and terrorist financing.
Recommended Citation
U.C. L.J. (forthcoming 2024)