The BIS published the concluding report of Project Tourbillon, which reportedly demonstrates that “cash-like anonymity” is possible in a retail central bank digital currency (CBDC).
The project, developed by the BIS Innovation Hub Swiss Centre, has reportedly tested the concept of payer anonymity, which “provides cash-like anonymity to payers, but not for payees.”
For example, a consumer paying a merchant using CBDCs does “not disclose personal information to anyone, including the merchant, banks and the central bank.”
However, the identity of the merchant is “disclosed to the merchant’s bank (as part of the payment) and is kept confidential there.”
This concept helps to “reduce tax evasion or illicit payments. The central bank is able to see the transaction amount but remains unaware of any details regarding the consumer or the merchant.”
Morten Bech, Head of the BIS Innovation Hub Swiss Centre, said:
“Privacy is indeed a key requirement for a retail CBDC. But it cannot be the only one: security and scalability are also crucial to how payments are handled. In Tourbillon, we looked at these requirements through the lens of how to protect privacy, and how fast can we process payments.”
Project Tourbillon also explores “the future, by exploring quantum-safe cryptography. In the future, quantum computers may be able to break encryption schemes, as explored in the Innovation Hub’s Project Leap.”
Therefore, Project Tourbillon explored “not only current, but also quantum-safe blind signatures, an important cryptography technique used in both designs to guarantee privacy and future security.”
It demonstrated that “implementing quantum-safe cryptography is possible, but that it requires more research, as it severely limits transaction processing and scalability.”
It’s worth noting that despite a CBDC project’s best efforts to provide a greater level of privacy, it could be the case that consumers are subjected to increased surveillance. That’s because a CBDC is controlled by a centralized entity, which is responsible for ensuring consumer protection and regulating financial transactions. Governments must ensure that individuals and/or organizations are not engaging in illicit activities. Given this additional responsibility, it becomes quite challenging to offer complete privacy and anonymity.