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As Wired Magazine said back in 2014, “If you use an online social network, you give up a serious slice of your privacy thanks to the omnivorous way companies like Google and Facebook gather your personal data.” But why do I need privacy if I’m not doing anything wrong? If I’m an average person, not too much money, without any political involvement or aspiration, nothing to hide or fear, why privacy matters for me? 

Carissa Veliz, an associate professor in philosophy at the Institute for Ethics in Artificial Intelligence at the University of Oxford, has a very short definition for privacy. According to her, privacy is power. In Carissa words, “Privacy is the key that unlocks the aspects of yourself that are most intimate and personal, that make you most you, and most vulnerable. Your naked body. Your sexual history and fantasies. Your past, present and possible future diseases. Your fears, your losses, your failures. The worst thing you have ever done, said, and thought. Your inadequacies, your mistakes, your traumas. The moment in which you have felt most ashamed. That family relation you wish you didn’t have. Your most drunken night.”

It is not new that we have readily given up nebulous rights over our data for the conveniences of the digital economy. The predictive algorithms that feed on our personal information are designed to anticipate our wants and needs, and most important, to create and shape what we will do/buy next. For Rainer Frost, a German philosopher, that is exactly the power definition “the capacity of A to motivate B to think or do something that B would otherwise not have thought or done.”

It is also true that previously to give apps and website access to our data, we must give our consent, but this “consent” is very vague. People don’t know the scope of use of the data. Of course we can infer, but we cannot be 100% sure what will happen after, if the data is sold and how it can be manipulated.

You, normal person, be sure that there are a lot of companies and also politicians, paying a considerable amount of money to have information over you, to understand your behavior and how you respond to incentives. Michael Foucault taught us that knowledge is power, and in this case, personal data information is a form to be empowered with knowledge.

European Union and the state of California in the US are taking the lead and implementing data protection regulation, moving towards authoritarian models like the Chinese one, and bringing awareness to the riskiness that the lack of privacy can cause. 

Through the General Data Protection Regulation (GDPR), the EU is aiming to comply with the European Convention on Human Rights, dated 1950, which states, “Everyone has the right to respect for his private and family life, his home and his correspondence.” GDPR is a bloc of rules, introduced in 2018, that imposes obligations onto organizations anywhere, so long as they target or collect data related to people in the EU. 

The California Consumer Privacy Act (CCPA) started at the beginning of 2020, given residents of the state tools to protect their data and personal information online, which is translated into more responsibility to businesses that collect information from customers. Under the new regulations, California residents will be able to demand companies to disclose what information is collected on them and request a copy of that information. Companies will be forced to delete consumers’ data upon request and they’ll be prohibited from selling information if the customer instructs them to via a mandatory “do not sell” link on the company’s website.

We live in a fragile system called democracy, that we wrongly act as it is granted. In professor Carissa words “Privacy power is necessary for democracy – for people to vote according to their beliefs and without undue pressure, for citizens to protest anonymously without fear of repercussions, for individuals to have freedom to associate, speak their minds, read what they are curious about. If we are going to live in a democracy, the bulk of power needs to be with the people. If most of the power lies with companies, we will have a plutocracy. If most of the power lies with the state, we will have some kind of authoritarianism.”

Democracy is absolutely not granted, and it might turn into an authoritarianism regime that has the possibility to not favor your preferences and ideas. 

Do you really need the fridge connected to the internet? Is accept all cookie pop-up really worth?

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When I came to the States, in 2018, to work in the beloved Midtown NYC, I had my first pure pearl experience with “digital payment only” or “non-cash basis”. Almost none of the grab and go restaurants in the area accept cash, such as Dig Inn, Sweet Greens, Little Beet, to mention a few.

During my first week I didn’t have a US bank account, which means no USD debt not credit card. In summary, for one week and had to ask one of my co-workers to pay for my lunch. At least it was a good opportunity to explain that with my Brazilian card I would have to pay IOF (Tax on Operations of Credit, Exchange and Insurance), and given that for almost everyone in the financial industry be tax efficient is a good thing, my ask for help became less awkward for a recently joined teammate. 

Besides the opportunity to talk about Brazilian taxes, it was shocking to see how easily my cash on hand lost all its meaning inside these restaurants. The promise of value and the whole abstract memory those physical pieces of paper were caring were absolutely gone. 

After that, I started to think a lot in my macroeconomic classes and cryptocurrencies. Of course it was not only me wondering about this digital transformation. Since January 2020, Bank for International Settlements (BIS) together with Bank of Canada, European Central Bank, Bank of Japan, Sveriges Riskbank, Swiss National bank, Bank of England and Board of Governors Federal Reserve System were tasked by the governors to develop analysis of the Central Bank Digital currencies (CBDC), a state-backed form of digital currency. According to this select group, all the discussions aim to safeguard public trust in money, maintaining price stability, and ensuring resilient payments infrastructure.

            But if everyone is already using a debit/credit card as a form of payment, what is the point of a “new” digital currency? Can’t our credit cards be considered digital money from the Central Bank? Starting from a common ground, the idea that most money comes in the form of publicly issued bank notes is not the reality, money is a mix of private and public-sector liability. Surprise: the money as we know today feels as public money only because that promise value, in which its unit can always be redeemed against public money at par, it is basically a regulation framework. There we start in our macroeconomic classes, looking at the hierarchy of Money and Credit:

CBDC, as it is designed, is a 100% Central Bank liability.  And there is one of the biggest fears, the critics of the digital currency foresee a “flight to trust”, with people preferring to place deposits directly with the Central Bank, hurting private bank funding. BIS explicitly mentioned about it in its executive summary “the introduction of a CBDC could erode banks’ retail deposits, resulting in a less stable funding mix. Any assessment of the materiality of these sources of financial stability risk, and the effectiveness of possible mitigants, would depend on the specific design of a CBDC and the structure of the financial system in which it might exist.”

It is also true that back in September 2008 the financial system lost confidence and CBDC could work as a way to have a full-collateralized digital currency ecosystem. On that front, the People’s Bank of China has already forced the country’s main digital payments providers (WeChat and Alipay) to hold all deposits as reserves at the central bank on a fully collateralized basis. 

Hyun Shin, the Economic Advisor of the BIS, is one of the most prominent advocates of digital payments and digital currencies. In one of its latest speeches he said:

“The beauty of money is that you don’t need to know the whole history – that I am holding it, is enough for it to be worth something to the next person, even though they don’t know how hard I had to work to acquire it. 

But money is also a social convention – there is a whole record that’s somehow captured in that paper. In theory, if you can have a complete ledger, you can have a complete institutional memory. That theory has long existed, but it has been a twinkle in people’s eye. What technology has done is enable an abstract idea to become concrete. You can construct that ledger and you can do it electronically and use the best of data.”

            And here comes another big concern: privacy. Is it worth it to have states with a ledger that gives them unlimited access to people’s money history? According to BIS data from 27 countries, not yet. Besides the recent push for anti-money-laundering and KYC regulations, the informal economy still a big part of people’s life, especially in developing countries, which can explain the negative response. People’s trust in the government is also another factor, China example in this case also generates massive questions.

            There are a lot of points that need to be addressed, such as the influence of CBDC in the monetary policy, interest rates and legal framework. But COVID19 is speeding the discussions, the disease is accentuating the tendency to have debit/card as the main form of payment, creating side-effects for the remaining holdouts, mainly in the informal economy. 

From BIS latest report: “Regardless of the motivation, any approach to issuing a CBDC will naturally be cautious, incremental and collaborative”. Stay tuned. 

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