BIS says digital cash can protect privacy but flags data breach risks

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The Bank for International Settlements (BIS) says digital cash could offer privacy similar to physical cash, but its underlying technology is not yet ready for production.

In a report published on Tuesday, the BIS outlined findings from the second phase of Project Aurum, which developed a prototype designed to balance user privacy with transaction transparency. A breach at one bank could expose its customers’ data but would not reveal the identities of customers at other counterparties, the report found. Compromising a transaction validator alone would also not expose users.

The findings address concerns that central bank digital currencies (CBDCs) could enable financial surveillance. Critics have previously pointed to code in Brazil’s CBDC pilot that could allow the central bank to freeze or reduce funds in digital wallets.