A Proposal for Enhancing the Security and Privacy of Digital Currencies

Abstract

Regarding digital currencies, the authors focus on 1) the security issues with the advent of quantum computers and 2) the privacy issues in relation with CBDC's wider collection of personal data. Many legal issues can be solved using technology. Thus, they propose central banks to adopt their privacy-enhancing technologies in cryptography, called “SK4SC,” which performs KYC (know your customer) while keeping PKI (public key infrastructure)-registered trading partners anonymous. Security and privacy in digital currency can be trade-offs. For example, the AML/CFT effort requires the collection of personal information about innocent people, which can be detrimental to their privacy. On the other hand, excessive restrictions on the collection of personal information to protect privacy may weaken the AML/CFT. However, adopting SK4SC can resolve the trade-offs by anonymizing KYC, which is essential for the AML/CFT.