Fidelity International chief executive Anne Richards stressed that loss of financial privacy – and, thereafter, even access – is the top consumer risk to consider before adopting central bank digital currencies worldwide.

According to Fidelity International’s Anne Richards, the top consumer risk for central bank digital currency (CBDC) adoption is related to privacy, specifically the ability to track all financial activities, legal or illegal.

«On the one hand, you want to make absolutely certain that moving to a digital currency does not increase the risk of financial crime,» Richards said during a panel on CBDCs at this week’s Singapore Fintech Festival. 

«But by the same token, you don’t want bad actors – not necessarily governments of today but potentially governments of the future – being able to use a CBDC as way of tracking and monitoring people that are inconvenient to them or indeed excluding them from the financial system.»

Exclusion Risk

In addition to reputation, privacy issues could lead to the risk of prolonged exclusion which is contrary to popularly promoted benefits of CBDCs like financial incision. 

«We know in most countries around the world, including developed economies, you do have a proportion of people who are already, to a degree, underserved and excluded financially,» Richards explained.

«There is a risk if we move to a fully digitized currency – be it stablecoins or a CBDC – that the proportion grows even larger. And it becomes even harder for those individuals to get back into the financial system which then will create a massive amount of consumer harm.»

Macro Risks

And more than just impact to individuals, there are macro risks from «second-order effects» when attempting to track financial activity such as the disruption of monetary transmission mechanism if wallets are placed directly on central bank balance sheets. 

«There is a risk that if we get the regulation and structure wrong at that point, we actually exacerbate, for example, economic cycles, because we’ve weakened some of the conventional monetary tools,» Richards said. 

«I fully agree [...] that privacy will be a key issue when it comes to CBDCs,» added Benoit Coeure, head of the Bank for International Settlements’ innovation hub, who was also on the panel. «You probably don’t want the governor of a central bank to know which kind of coffee you bought at Starbucks in the morning.»