CBDC and Trust in A Central Bank: Transitivity Of Preferences Vs. The Privacy Paradox

Koziuk Viktor (), Ivashuk Yurii (), Hayda Yurii () and Dluhopolskyi Oleksandr ()
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Koziuk Viktor: Faculty of Economics and Management, West Ukrainian National University, Ukraine
Ivashuk Yurii: Faculty of Economics and Management, West Ukrainian National University, Ukraine
Hayda Yurii: West Ukrainian National University, Chernihiv Polytechnic National University, Ukraine
Dluhopolskyi Oleksandr: Faculty of Economics and Management, West Ukrainian National University, Ukraine; Institute of Public Administration and Business, Lubelska Akademia WSEI, Poland

Financial Internet Quarterly (formerly e-Finanse), 2024, vol. 20, issue 4, 32-47

Abstract: The privacy and anonymity of transactions are considered some of the biggest challenges when designing Central Bank Digital Currencies (CBDC). While many surveys show that people strongly prefer privacy in their transactions, behavioral theories suggest that human behaviour in digital spaces is more complex, a phenomenon known as the privacy paradox. The research aims to measure privacy preferences in specific situations and examine how these preferences influence choices between anonymous transactions versus the design of CBDC functionality. The study used the ANOVA method to determine if there were significant differences between groups based on privacy preferences. Survey data from respondents in emerging markets showed a mild form of the privacy paradox. The research measured privacy tendencies in three areas: general, digital, and financial environments, and found a statistically significant correlation between these measures. However, the respondents' privacy preferences did not consistently align with their choices between transaction anonymity and CBDC functionality, nor did they consistently relate to trust in central banks as privacy guarantors or the importance of central bank independence for ensuring privacy. The ANOVA test found no significant differences in privacy preferences between respondents who prioritized anonymity or functionality, or between those who trusted or did not trust central banks to guarantee privacy and their independence in doing so. This suggests that when faced with complex decisions, people may exhibit intricate patterns of preference, which is crucial for optimizing CBDC design.

Keywords: Anonymity of Transactions; Privacy Paradox; Digital Money; Central Bank Digital Currency (CBDC) (search for similar items in EconPapers)
JEL-codes: E41 E42 E51 E58 G20 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:finiqu:v:20:y:2024:i:4:p:32-47:n:1003

DOI: 10.2478/fiqf-2024-0025

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