Biometrics and CBDC: One step forward for technology, two steps back for freedoms?

The technology surrounding finance is evolving at breakneck speed. This dynamic has paved the way for new forms of payments. Among these, central bank digital currencies (MNBC) or (CBDC) whose use involves the use of users’ biometric data. According to the owners of this project, the use of biometric data should promote faster, more efficient and secure financial transactions. But according to the opinion of several experts, this option is more than worrying, in particular because of its perverse effects. The promise of improved operations would be a well-dressed charade aimed at depriving citizens of their financial freedom. This risk is at the heart of the concerns, but also of the controversies aroused by this supposedly revolutionary program. Are the arguments of CBDC critics reasonably valid? It is to this question that the following development will attempt to answer. In particular, it will be a question of examining the merits of the concerns raised by the CBDC projects. We will also see how the use of biometric information could potentially compromise the privacy and data security of individuals.

CBDC and the use of biometric data: a more than interested marriage?

Recently, Sam Altman, the CEO of the artificial intelligence company OpenAI, launched a crypto project. Called Wordcoin (WDC), the initiative of the designer of ChatGPT presents itself as revolutionary compared to the crypto offer available. This, because it exploits the biometric data of its users.

Wordcoin has been a big hit with users who number in the millions around the world. Yet concerns around its operation quickly emerged. First in the UK, then in France.

Financial regulators in these two European countries are concerned about the biometric data the company acknowledges is collecting and using it. This, in exchange for cryptos or a biometric identity card.

These regulatory concerns actually echo those raised by many financial and technology experts. According to them, the Wordcoin project is effectively a CBDC in disguise. The initiative would present, according to them, increased risks for the protection of personal data.

What detractors are basically saying is that the benefits that CBDCs boast about are nothing but bait for financial enslavement. Is this really the case? It is interesting to see how a CBDC works to answer this.

An MNBC or CBDC, what exactly is it and what are the risks?

Central bank digital currencies (MNBC) are not cryptos at all. They are digital forms of traditional money usually issued by a state central bank. The latter guarantees its regulation in accordance with the prerogatives assigned to it by national financial laws.

Although they are a major development in the global financial landscape, their link to even a central bank is a big problem. This is because it is subject to a link of dependence, since it is issued and regulated by a financial institution. This, with all the possibilities that this implies in terms of control. However, it is exactly this control which, in general, is arbitrary, that cryptos work to circumvent.

It is this increased monetary and banking control that makes CBDC projects unpopular in public opinion. Why that ? Because in fact, the expression of this control is found in the backing of CBDCs to existing fiat currency. It is true that this mechanism provides citizens with a digital alternative to fiat currency.

The promoters of these projects also defend the idea of ​​better monetary efficiency. This relevance also has the advantage of reducing the risk of payment-related fraud. This is thanks to better traceability of transactions.

In a nutshell, CBDCs would be structurally designed as a discharge for states and financial institutions. They could then monitor transactions and financial flows more closely. Surveillance that could violate users’ right to privacy and financial freedom.

Ultimately, experts believe that the risks of CBDCs on individuals are such that implementation should be abandoned. Otherwise, these strict measures for the protection of privacy are necessary.

Should CBDC projects be thrown out with their bathwater?

Concerns around payments made with CBDCs may be valid based on the reasons discussed above. However, should we get rid of it as many analysts and experts suggest? The answer could be negative.

Indeed, other options can be taken into account. This then implies also considering counter-arguments as well as measures that can potentially mitigate the risks associated with the implementation of CBCDs.

Concretely, concerns about privacy and its protection could be reduced. This, by implementing a strict and clear regulation for this purpose. States always have the option of imposing robust security protocols. A choice that could ensure that biometric information is not exploited for malicious purposes.

In this vein, laws on the protection of personal data could limit excessive collection. An option that could extend to the unauthorized sharing of personal information related to CBDC transactions.

However, the realization of these possibilities should be inclusive. Thus, a consultation of stakeholders, particularly citizens and cybersecurity experts, would be particularly useful.

To do so, governments could consider informed consent mechanisms for the use of collected biometric data. This would allow individuals to control how their data is actually used. If such choices are made, a balance between technological progress and the protection of individual rights could then be found. The big question remains whether these avenues would be explored. Which, in the current state of things, is not really certain.

Conclusion

Ultimately, payments involving CBDCs and biometrics offer promising benefits. They do, however, raise questions about privacy, surveillance and individual rights. With appropriate regulations, a certain balance can be found between innovation and the protection of individual data. Fears of financial enslavement could then dissipate. Especially if a relevant strategy, maximizing benefits while minimizing risks, is applied. In the meantime, exchanges are necessary to create a future that is financial, digital, secure and respectful of individual freedoms.

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