RDP 2024-02: Valuing Safety and Privacy in Retail Central Bank Digital Currency 7. Summary and Discussion

Our results suggest Australians do not seem to value the added safety of a claim on the RBA instead of a commercial bank, holding privacy and other characteristics of the claim constant. This is consistent with bank deposits already being perceived by the public as a safe form of money. Reasons beyond safety could also be contributing, such as views about whether it is appropriate for the government to perform this expanded role. In any case, without any changes to these potential drivers of public attitudes, giving the public access to a digital claim on the RBA appears unlikely to be a strong value proposition for retail CBDC.

Privacy settings for a retail CBDC – though it is not yet clear what they would be in practice – look more consequential. The average consumer values transaction anonymity and, to the extent that transaction data do need to be shared with other entities, the average consumer cares about who those entities are. For example, we estimate that, on average, Australian consumers would pay $5 per year more for access to an account that makes transaction data available to the RBA instead of a commercial bank, assuming that AUSTRAC can access transaction data in both cases. Aggregated over the adult population, this equates to around $100 million per year, a figure that would likely rise a little further if the account also offered anonymity for small transactions. This result is consistent with survey evidence from the Office of the Australian Information Commissioner (2023) about attitudes of Australians to privacy in a more general context. Respondents to that survey placed a lot of importance on their privacy when choosing a product or service and were generally more comfortable sharing data with federal government agencies than with private financial institutions.

A potential challenge to this privacy-based value proposition for retail CBDC is that it is somewhat in tension with prevailing views of the RBA and other central banks about the most likely CBDC issuance model. The RBA has expressed ‘a strong presumption that any issuance of CBDC in a market economy like Australia would be via a two-tier system’, whereby private entities are involved in the distribution of CBDC (Richards et al (2020), with Jones (2022) repeating this sentiment). The logic here is that central banks are unlikely to have a comparative advantage in delivering customer-facing services directly to households and businesses, especially in an environment where technology changes rapidly. CBDCs issued under such a two-tier model would either involve commercial entities having access to transaction data, or presumably at least the appearance of them doing so. Some proposed CBDC designs do involve a more direct relationship between the central bank and users, with European Central Bank (2023) discussing the potential for a Eurosystem-developed wallet, for example. But even in that case, private payment service providers may be given responsibility for onboarding, verifying customer credentials, and performing any necessary measures to mitigate financial crime. Further work is required to understand the different privacy possibilities under different potential issuance models.

Even if the privacy-based value proposition could be fulfilled, that alone would not be justification enough to issue one. Other trade-offs would also need to be considered. For example, the costs of setting up and running a new CBDC infrastructure would be significant and potentially large enough to offset some of the privacy benefits identified here.