Ammar Zafar
Abstract Debates over central bank digital currencies (CBDCs) often emphasise efficiency, innovation and anti-money laundering compliance, while neglecting privacy as a determinant of their viability. This article argues that privacy is not merely a rights-based concern but also an economic variable that shapes adoption, trust and stability. Using a law-and-economics framework, it introduces a privacy parameter, p , into user utility functions and examines how different levels of privacy affect CBDC demand, velocity, and disintermediation. The analysis engages with the behavioural limits of this model, including the privacy paradox, consumer habituation to digital surveillance and captive demand, where alternatives are scarce, and argues that legal commitment devices are needed precisely because privacy preferences are fragile and state-contingent. Through a comparative study of the EU, UK, US and China, the article maps how evolving privacy regimes, including the EU’s Digital Omnibus reform proposals and the UK’s Data (Use and Access) Act 2025, condition financial outcomes, and examines how AML/CFT obligations already subordinate data protection in practice. It concludes that privacy acts as a dual safeguard, protecting freedoms while reinforcing monetary resilience, and that safeguards must be entrenched before their absence is felt.