CBDC Privacy and the Merchant

Defining the right privacy level for a Central Bank Digital Currency (CBDC) is a critical decision when designing a CBDC. The Bank of Canada has published a Staff Working Paper that focuses on the needs of businesses and considers the options ¹.

Businesses need information such as historical transactions and cash flows to make lending decisions and so privacy, or anonymity, are not an option. So where should the line be drawn? If a business accepts cash from its customers, these transactions are not recorded on the point-of-sale (POS) equipment, potentially impacting their refinancing prospects. With the issuance of a CBDC, a central bank could collaborate with an entity such as Square to develop terminal devices, with a legal status such as a public - private partnerships.