Will central bank digital currencies (CBDC) replace cash and bank transfers in the future? And will they be an ultimate tool for financial surveillance and control? Or is another, more benign, future possible?
David Chaum, creator of the Bitcoin predecessor eCash and, more recently, the elixxir cryptocurrency, believes the democratic world can have a version of CBDCs that protects privacy. He is working with the Swiss National Bank (SNB) on Project Tourbillon, designed for privacy-focused central bank money.
The project will be developed under the auspices of the Bank of International Settlements’ (BIS) Innovation Hub, the organization announced on Thursday. The project will add to the range of CBDC pilots already in the works by the BIS Innovation Hub, like the projects Helvetia and Mariana – both involving the SNB, too.
The technology underlying the Project Tourbillon will combine privacy preserving functions and quantum-resistant cryptography developed by Chaum, the BIS announcement says. The system will also be scalable as it will be “using an architecture that is compatible with, but not based on, distributed ledger technology,” the press release reads.
The concept, based on Chaum’s blind signature technique, has been outlined in a joint research paper by Chaum and Thomas Moser, alternate member of the SNB governing board.
According to Morten Bech, head of the BIS Innovation Hub Swiss Centre, the project allows to avoid trade-offs between cyber resilience, scalability and user privacy. “Project Tourbillon will build and test a prototype that reconciles these trade-offs and pushes central banks’ technological frontier,” Bech said in the BIS announcement.
The prototype is slated to be completed by mid-2023.
Not like China
According to Chaum, the SNB first approached him last year about his eCash technology and he took it as a chance to prove that a CBDC can be designed in a privacy-protecting fashion. Speaking with CoinDesk in an exclusive interview, he pointed out China as an example of omnipresent digital surveillance by the government. China’s central bank has one of the world’s most advanced CBDC projects, with 100 billion yuan (US$13.9 billion) in transactions already completed.