The article was first published in LiveMint. The views are of the individual authors.

The introduction of CBDCs pose three important challenges that need to be addressed: first, the increased threats to privacy of individuals; second, choosing the privacy- and security-enhancing technology that needs to be employed; and third, the regulatory architecture that has to be set up to combat an issue such as a data breach.

Despite all these challenges, it would be prudent not to drop the idea of CBDCs altogether given that they would reduce transaction costs, and help with instantaneous cross-border transaction settlements and an easier transmission of monetary policy. The centralized network of data collection and storage, and the data collected on these digital transactions by central banks could spur innovative practices and make it easier to chart the credit history of individuals, issue loans and track their spending and prevent fraudulent transactions.

Read full article here.

• Privacy