The researcher of the US Federal Reserve (FRS) Michael Lee (Michael Lee) believes that cryptocurrencies from the Central Bank will ensure the privacy of user data, unlike payment platforms.
Lee came to this conclusion after doing collaborative research with Rod Garratt, professor of economics at the University of California, Santa Barbara. Due to the pandemic, many have started to ditch cash and move to digital payments. However, researchers are concerned that the payment giants are using consumer data in violation of antitrust laws.
When making digital payments, firms collect personal data from customers, while when paying in cash, the buyer remains anonymous. In fact, payment platforms and firms have exclusive access to user data and can then use it for commercial purposes or to fight competitors.
Lee and Garrett believe central bank digital currencies can solve this problem by becoming the best “successors” to fiat currencies. First, stablecoins from central banks will ensure the privacy of user information and prevent it from being transferred to large technology platforms. Secondly, transactions with such assets will be carried out much faster and cheaper.
While Lee and Garrett consider government cryptocurrencies to be the best protectors of consumer data, they do not support conventional cryptocurrencies, although they have called them an alternative to large payment platforms. Experts noted that payments with cryptocurrencies can provide privacy, but will entail high transaction costs.
During the pandemic, interest in government cryptocurrencies has skyrocketed. Many central banks have begun to actively explore the possibilities of launching their own digital currencies, as well as exploring what needs to be changed in the legislation for this.
Deutsche Bank analysts recently said government cryptocurrencies could replace cash and eliminate intermediaries in the banking system. In addition, Visa cryptocurrency chief Cuy Sheffield said that central bank stablecoins will be the main trend in the next decade.