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A Theory Model of Digital Currency with Asymmetric Privacy

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  • Tinn, Katrin

Abstract

This paper considers introducing asymmetric privacy in the design of central bank digital currencies (CBDC) and digital currencies more generally, to preserve the privacy of money spent while keeping the benefits of digital records for money received. It is shown that this feature would help minimize real distortions between consumers, firms, and financiers, while enabling tax optimization and better access to external financing. Protecting the privacy of consumers is always desirable from an aggregate standpoint as long as there exist some privacy concerns. Implementing asymmetric privacy is technologically feasible, using for instance Zero-Knowledge proofs or other privacy tools.

Suggested Citation

  • Tinn, Katrin, 2024. "A Theory Model of Digital Currency with Asymmetric Privacy," CEPR Discussion Papers 19275, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19275
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    File URL: https://cepr.org/publications/DP19275
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    More about this item

    Keywords

    Central bank digital currency design; Data privacy; Learning; Real effects of privacy preferences; Verification costs;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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