Security and Privacy in Digital Payments: Blockchain, PIX, and Central Bank Digital Currencies (CBDCs)

Every time you tap a phone to pay for coffee or send money to a friend, you are relying on a complex digital system that must balance three competing needs: keeping your money safe, keeping your personal details private, and ensuring the rules of the financial world are followed. For decades, these systems were mostly controlled by banks and governments, but the last fifteen years have introduced new ways to move value. Some of these new methods, like the instant payment networks used in Brazil, are run by central authorities who can see every transaction. Others, like public blockchain networks, are run by a scattered group of users where no single person is in charge, and transactions are often hidden behind codes that make them hard to trace. A third group, known as digital currencies issued by central banks, is currently being built to try to combine the best of both worlds. The big question facing the world today is how to design these systems so they are secure and efficient without sacrificing too much privacy or letting criminals slip through the cracks.

A team of researchers from universities in Portugal and Brazil set out to solve the confusion surrounding these different systems. They gathered and analyzed fifty high-quality studies published between 2014 and 2025, looking at everything from Brazil's PIX system to various blockchain networks and the digital currencies being tested by central banks. Instead of treating these technologies as separate islands, the researchers created a new way to map them all onto a single chart. This chart uses three simple questions to describe any payment system: Who holds the power to change the rules? How much information about a transaction is visible to the public or the authorities? And are the legal rules built into the system from the start, or are they checked only after the fact? By answering these questions for each system, the researchers could see exactly where the trade-offs lie and which designs might work best for different needs.

The study found that no single system is perfect for every situation, but they do fall into three distinct patterns. The first pattern is what the researchers call the "Regulatory Clarity Model," which is exactly how Brazil's PIX system works. In this setup, a single central bank holds all the authority. It sets the rules, and the banks that operate the system must follow them strictly. Because the rules are built into the system from the very beginning, it is very easy for authorities to stop illegal activity and ensure everyone complies with the law. However, the price of this safety and order is privacy; the system is designed so that the authorities can see almost everything that happens, leaving little room for users to keep their financial habits hidden.

At the other end of the spectrum is the "Autonomy Model," which describes public blockchain networks like Bitcoin or Ethereum. Here, no single person or bank is in charge. The rules are set by a large community of users, and changing them is difficult and slow. This design offers a high degree of freedom and makes it nearly impossible for anyone to censor a transaction. However, this freedom comes with a significant downside for regulators. Because the system does not have built-in rules to check for illegal activity, authorities can only enforce laws at the edges where people convert their digital money back into regular cash. This creates a gap where illicit transactions can happen without being noticed, and fixing these gaps often requires complex international cooperation rather than simple system updates.

Sitting in the middle is a "Hybrid Governance Model," which is the path many central banks are exploring for their own digital currencies. These systems try to blend the two extremes. A central bank keeps the ultimate power to set monetary policy and ensure stability, but it uses a distributed network of banks and intermediaries to process the transactions. This allows for a middle ground where privacy can be protected for small, everyday purchases while still allowing authorities to see large, high-risk transfers. The researchers found that this middle path often performs the best when looking at a combination of factors like fraud prevention, speed, and user trust. It suggests that the future of digital money might not be about choosing between total control or total freedom, but finding a balanced design that offers both.

The researchers also looked closely at the technology used to protect privacy, such as mathematical tools that allow someone to prove a transaction is valid without revealing who sent it or how much was sent. While these tools are powerful, the study found they are currently too slow to handle the massive volume of transactions that a country like Brazil processes every day. The system PIX handles over three billion transactions a month, and the privacy tools tested in the studies would struggle to keep up with that speed without significant hardware upgrades. This means that while we have the technology to hide details, we have not yet solved the engineering problem of doing it quickly enough for the whole world to use.

Ultimately, the study concludes that we cannot simply copy one system and apply it everywhere. The best design depends entirely on what a society values most at a given time. If a country prioritizes stopping crime and ensuring every transaction follows the law, a centralized system with built-in rules is the most effective choice. If a society prioritizes individual freedom and resistance to control, a decentralized system is superior, even if it makes regulation harder. The most promising path forward appears to be the hybrid approach, which attempts to offer the security of a central authority with the flexibility of a distributed network. The researchers propose a new set of measurements to help governments and banks compare these systems fairly in the future, ensuring that as we build the next generation of money, we make choices based on clear evidence rather than guesswork.