A Theory Model of Digital Currency with Asymmetric Privacy

55 Pages Posted: 17 Jul 2024

See all articles by Katrin Tinn

Katrin Tinn

McGill University - Desautels Faculty of Management; Centre for Economic Policy Research (CEPR)

Date Written: July 11, 2024

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.

Keywords: Central bank digital currency design, data privacy, learning, real effects of privacy preferences, verification costs, technological tools for privacy

JEL Classification: C70, D18, D83, E42, E58, G21, G23, L86

Suggested Citation

Tinn, Katrin, A Theory Model of Digital Currency with Asymmetric Privacy (July 11, 2024). Available at SSRN: https://ssrn.com/abstract=4891933 or http://dx.doi.org/10.2139/ssrn.4891933

Katrin Tinn (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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