UK's Digital Pound Approach Should Help Manage Privacy Concerns, Experts Say
  • The U.K. released its results from its digital pound consultation on Thursday, and privacy was a key worry.
  • The idea to tackle privacy concerns by having a platform model and releasing legislation should help, experts told CoinDesk.

The U.K.’s approach to handling privacy concerns posed by a digital pound should help quench concerns, according to interviews with a wide range of crypto industry legal and technical insiders.

The highly anticipated U.K. consultation on a digital pound closed in June last year, and the Bank of England (BoE) – alongside the government’s finance arm, the Treasury – released the results from it on Thursday. Many of the 50,000 responses welcomed the proposed digital pound design, but chief among the concerns raised was privacy.

Several experts that CoinDesk spoke with agreed that the government’s approach to tackling these concerns could be effective.

“It has recognized privacy concerns at every stage,” Jannah Patchay, executive director and policy lead at the Digital Pound Foundation, said in an interview, praising the “really good job” the government did to keep this point in mind.

Platform Model

Respondents strongly agreed with the proposal that neither the bank nor the government should have access to personal data but were concerned this would not be enforced, the consultation response said.

“On the face of it, the Bank of England’s ‘platform model’ is an elegant solution to the privacy problem,” Richard Gendal Brown, chief technology officer at R3, said in a statement.

Private firms – instead of the government – would have direct and commercial relationships with customers, the consultation response said.

The BoE’s platform model would mean that the central bank only provides the core infrastructure and ledger for a digital pound while private firms would act as wallet providers. The private platforms would require the identity information of wallet account holders to comply with anti-money laundering regulations.

Laws

The government has said it’s taking a cautious approach, and a decision on a digital pound could be made in 2025 or 2026. Before a digital pound is launched, Parliament would have to put through legislation that is meant to protect people’s privacy.

“Their commitment to enshrining individual privacy and control in law should reassure the public,” Varun Paul, senior director for central bank digital currency and financial market Infrastructure at Fireblocks, said in a statement.

Some industry lobbying groups are initially supportive of the government’s approach.

“We welcome the Bank of England’s and HM Treasury’s response to the digital pound consultation, and we are pleased to see that primary legislation would guarantee users’ privacy and control of a digital pound,” a spokesperson from CryptoUK said in a statement.

However, it is not yet clear what the government’s legislation to safeguard people’s privacy will actually look like. Plus, the digital pound is still in its design phase, meaning nothing is set in stone, said Louise Abbott, a partner at Keystone Law.

“We would like to see much more detail from the government and the Bank of England on this important subject, including a clearer plan of action and timeline around the next steps for a digital pound,” CryptoUK said.

Before a final stamp is made on a digital pound’s future, the government has committed to consulting more with the public.

“It’s not enough that the solution be technically correct and private-by-design; the key is ensuring that the population also believes that this is the case,” Brown said, adding that the design of a digital pound needs to keep personally identifiable data well away from the core ledger.

“The goal should be ‘we can’t access your data’, rather than simply ‘we promise we won’t access your data’,” Brown said.

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2024-01-31 12:09