Michael Lee, a researcher at the US Federal Reserve, believes that cryptocurrencies from the Central Bank will ensure the confidentiality of user data, unlike payment platforms.
Lee came to this conclusion after conducting joint research with Rod Garratt, a professor of economics at the University of California, Santa Barbara. Because of the pandemic, many people began to abandon cash and switch to digital payments. However, the researchers are concerned that the payment giants are using consumer data, while violating antitrust laws.
When making digital payments, firms collect personal data of customers, while when paying in cash, the buyer remains anonymous. In fact, payment platforms and firms get exclusive access to user data, and then can use it for commercial purposes or to fight with competitors.
Lee and Garrett believe that central bank digital currencies can solve this problem by becoming the best “successors” to fiat currencies. First, stablecoins from central banks will ensure the confidentiality of user information and prevent its transfer to large technology platforms. Secondly, transactions with such assets will be carried out much faster and cheaper.
Despite the fact that Lee and Garrett consider state-owned cryptocurrencies to be the best” defenders ” of consumer data, they do not support conventional cryptocurrencies, although they called them an alternative to large payment platforms. Experts noted that payments with cryptocurrencies can provide confidentiality, but will entail a high transaction cost.
During the pandemic, interest in state-owned cryptocurrencies increased dramatically. Many central banks have begun actively exploring the possibilities of launching their own digital currencies, as well as studying what needs to be changed in the legislation to do this.
Recently, analysts at Deutsche Bank said that state-owned cryptocurrencies can replace cash and eliminate intermediaries in the banking system. In addition, the head of the cryptocurrency direction of Visa, Cuy Sheffield, said that stablecoins from central banks will become the main trend in the next decade.