Choices that will promote CBDCs that abide by democratic values

Iota Nassr

Policy Analyst, OECD

With discussions around Central Bank Digital Currencies (CBDCs) intensifying and the issuance of digital public money becoming increasingly achievable, we must design choices that will promote CBDCs abiding by democratic values.

As part of the monetary system, CBDCs represent public goods. Their widespread adoption, should it happen, could represent a significant change in the way societies engage, circulate and exchange money. Design choices could contribute to citizen welfare and abide by democratic values and principles.  

Guarding against threats to democratic values  

CBDC design and implementation choices could protect individual liberties and human rights. Choices around governance and technology used can support the policy objectives of providing equitable treatment: available, accessible and affordable CBDCs. Appropriate oversight and accountability mechanisms can support the safeguarding of civil and human rights. The promotion of users’ trust particularly through security and operational resilience of CBDC systems could be a cornerstone to the success of a CBDC development. 

Preserving physical cash  

Universal access to central bank money would need to be maintained when introducing a CBDC. Continuous availability and widespread acceptability of physical cash would therefore need to be protected in jurisdictions where CBDCs are issued, as one of the ways to support those unable to use CBDCs so that they can still enjoy the benefits of access to physical forms of public money.  

Universal access to central bank money would
need to be maintained when introducing a CBDC.

Protecting users’ privacy  

CBDC design and implementation choices should consider ways to support the protection against any kind of privacy-intrusive unlawful surveillance. This concerns both privacy protection as well as limits to the programmability of money or conditionality built-in CBDC design. This will prevent CBDCs from being used arbitrarily to censor individuals and exert control over users. 

Built-in privacy protections, disassociability and other design choices are examples of how privacy can be included by default in potential CBDCs. Protection of users’ privacy will promote their safety, dignity, freedom of thought and expression.  

Building trust with citizens  

An important decision that could allow a CBDC to abide by democratic principles is the fundamental decision about issuing a CBDC. Any such policy decision would need to make sense for the citizens who will rely on it in the first place, which includes citizens’ trust in the instrument.  

As CBDCs progress from concept to pilot to reality, more work is needed to carefully consider how design, technology and functionality choices ensure that democratic values are considered and embedded — to support ensuing benefits that rest on democratic principles and trust.