Key facts
- BIS stated digital cash can achieve "cash-like privacy."
- The BIS Project Aurum Phase 2 report found the technology stack is not yet "production ready."
- Compromising one bank in the system may expose its customer data but not customer identities from other counterparties.
- A validator-level compromise alone would not be enough to expose end users.
- US President Donald Trump banned federal agencies from issuing a CBDC in January, citing financial stability and privacy concerns.
The Bank for International Settlements (BIS) has indicated that digital cash could offer privacy protections comparable to physical currency, but warned that the underlying technology is not yet ready for widespread implementation. In its Project Aurum Phase 2 report, published on Tuesday, the BIS detailed a prototype designed to balance user anonymity with transaction transparency.
The report explored the technical features necessary for a privacy-preserving central bank digital currency (CBDC). While the BIS found that a breach at a single bank would not compromise customer data from other institutions, it acknowledged that such a breach could still expose that bank's user data. A compromise at the validator level alone was deemed insufficient to expose end-users.
Concerns regarding the potential for financial surveillance have been raised by critics of CBDCs. In 2023, Brazil's central bank released the source code for its CBDC pilot, which users found contained mechanisms for surveillance and control, including the ability to freeze or reduce funds in CBDC wallets. Earlier this year, U.S. President Donald Trump issued a ban on federal agencies developing a CBDC, citing financial stability and privacy issues.