March 2, 2021 –Experts are warning about the lack of understanding of the privacy implications of bitcoin, following Treasury Secretary Janet Yellen’s comments on February 22 that warned about the digital currency’s inefficiency.
Speaking at a Technology Policy Institute event Monday about fintech in the Biden administration, experts including Amy Davine Kim, chief policy officer at the Chamber of Digital Commerce, and TPI Senior Fellow Sarah Oh cautioned about the jump into the use of bitcoin and digital currencies as acceptable payment methods without fully understanding what is really going on. A growing number of companies have begun accepting digital currencies as a form of payment for services and products.
The primary concern that the panel discussed Monday is how payment information is logged. The decentralized nature of the blockchain, on which the digital currency is dependent, requires all users have a ledger of transactions made with the currency, whereas a cash transaction is harder to trace, adding a privacy element.
But financial privacy is still an issue even with traditional currency. Banks centralize the ledger of transactions and people are still concerned about that level of privacy. Add to it an even more uncertain digital currency, and you have a recipe for more concern, the experts said.
Because with cryptocurrency, determining who has the ability and who should have the ability to view what and where you’re spending crypto is yet to be resolved, the experts said.
Not all is bad with crypto, though, according to fintech Gattaca Horizons CEO Daniel Gorfine. He said the COVID-19 pandemic has taught us that fintech can play an integral role in building back what we lost in the pandemic.
In defense of crypto, Gorfine compared cash-based versus digital token-based systems. With the latter system, all the benefits of cash is there with the addition of real-time settlement and interoperability with commercial bank money. In other words, transactions can happen much faster than traditional bank exchanges.
Gorfine said digital tokens can benefit the retail industry by allowing small businesses and merchants an alternative payment system that is lower cost. He said a digital wallet service may also be a lower cost solution to offer from a technology and operational regulatory perspective than a traditional bank account.