Myanmar, led by the military junta, plans to create a central bank digital currency (CBDC) that will join the kyat as legal tender.

The oppressive ruling military council said it believes a “digital currency will help improve financial activities in Myanmar,” Deputy Information Minister Major General Zaw Min Tun told Bloomberg on Thursday. February 3.

The Southeast Asian nation would need help. The World Bank has said it expects Myanmar’s economy to grow by 1% this year after shrinking by 18% last year, following the January 29, 2021 coup.

Stablecoins were adopted by the government-in-exile of Aung San Suu Kyi, the unity of the ousted civilian leader nation. In December, it declared Tether’s USDT its official currency. Of course, that was largely for fundraising and thumbing its nose at the junta, which banned cryptocurrencies in May 2020.

So, a central bank digital currency (CBDC) seems like a reasonable idea on the face of it, especially in a country as poor as Myanmar, which could use a financial tool that helps unbanked people get recognized by the system. financial.

And here’s the rub: hardly anyone in Myanmar wants to be recognized. And with good reason.

Citing “daily atrocities,” Human Rights Watch Asia director Brad Adams asked last week on the anniversary of the coup: “How many people does the Burmese army have to she still arrest, torture and shoot before influential governments act to cut the junta off its tracks? money and weapons?

Is confidentiality possible?

This is the problem with CBDCs. Despite their many benefits – ranging from faster and cheaper settlement of transactions to financial inclusion – they have one very big flaw: oversight.

Despite all the talk about bitcoin’s anonymity – which is overblown – cryptocurrencies can be tracked quite easily. After all, the entire transaction history of each token is publicly visible online. It is difficult, but not impossible, to trace the transaction to the bitcoin owner.

While a CBDC might have this less than perfect shield of anonymity, it is unlikely to even in free and democratic countries, the Financial Times (FT) concluded in May. In an article titled “Why CBDCs are likely to be identity-based,” FT said, “Central banks are realizing that CBDCs will need to be intimately tied to identity to address illicit finance and the risk of disintermediation. banking”.

At the time, Goldman Sachs’ economic research division concluded that “to avoid facilitating illicit activity, central banks have mostly decided not to use fully anonymous accounts or to cap anonymous transactions, and have instructed commercial bank intermediaries to monitor customers and transactions,” FT reported.

“What the CBDC’s research and experimentation seems to show is that it will be nearly impossible to issue such currencies outside of a comprehensive national digital identity management system,” FT added. . “Meaning: CBDCs will likely be linked to personal accounts that include personal data, credit history, and other forms of relevant information.”

This will be true to some extent, even for a US digital dollar. In an engineering design test for a U.S. CBDC announced on Thursday, researchers from the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology’s Digital Currency Initiative (DCI) said they knew consumer privacy would be an essential design, but ultimately its privacy features would be determined by elected officials.

Read more: Boston Fed and MIT digital dollar test cast doubt on blockchain as a processing platform

However, the team “created architectures where the central bank did not necessarily need to see or store [much] user information,” said Neha Narula, director of MIT’s DCI. “What really excites me about the next phase of work is exploring cryptographic designs for privacy. We have a lot of techniques in computing that can help us verify the integrity of information without necessarily revealing exactly what this information says.

Controlled anonymity

In terms of major savings, China is far ahead not only in designing and launching a CBDC, but also in considering privacy features.

“A completely anonymous central bank digital currency is not an option,” said Mu Changchun, director of the Digital Currency Research Institute at the People’s Bank of China. Instead, he said, the digital yuan will have “controllable anonymity” as a key feature. It’s not a new concept.

See also: China pushes for global rules for CBDCs

“We know that the demand from the general public is to maintain anonymity using paper money and coins,” Mu said in 2019. “We will give those who request it anonymity in their transactions. But at the same time, we will keep the balance between “monitorable anonymity” and anti-money laundering, CTF [counter terrorist financing]as well as tax matters, online gambling and electronic criminal activity.

It seems like a good bet that the Myanmar government will at least go that far, if not remove anonymity altogether.

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