The European Central Bank (ECB) leans toward a “transparent” digital euro over one that ensures a higher level of privacy for its users, a presentation devoted to the project has indicated. In the document, the monetary authority explores different privacy options for the eurozone’s digital fiat.
User Anonymity Not Desirable for Digital Euro, ECB Says
A presentation by the European Central Bank has thrown some light on the regulator’s “preliminary views” on the privacy-related features of the digital euro. It comes as the project to issue a central bank digital currency (CBDC) in the eurozone is still in its investigation phase.
Recognizing that maintaining control over their personal data and upholding privacy as a fundamental right is important for Europeans, the monetary authority nevertheless remarks that a shift towards digital payments implies less privacy by default. That’s despite the possibility to preserve some cash-like features in a digital version of the euro.
A report by the ECB highlighted privacy as a key concern for future users of the digital euro, but the bank now says that privacy needs to be assessed in the context of other EU policies. Among them, anti-money laundering (AML) and counter-financing of terrorism (CFT) efforts. Elaborating on the matter, the regulator states:
User anonymity is not a desirable feature, as this would make it impossible to control the amount in circulation and to prevent money laundering.
Digital Euro Data to Be Transparent Rather Than Private
The European central bank further insists that the Eurosystem, which consists of the ECB and the central banks of the eurozone members, should have access to the digital euro transaction data in order to validate payments. Also, anonymized, aggregate data should be available for statistical and oversight purposes as well as to fight fraud and crime.
In the presentation, brought to the public’s attention by crypto venture advisor Patrick Hansen this week, the ECB lists three privacy options for the digital euro platform. The first one, which is referred to as the “currently applicable baseline scenario,” aims to ensure that personal and transaction data is transparent to intermediaries which need to comply with AML and CFT regulations.
The second approach would allow a higher degree of privacy for low-value payments and the last one envisages privacy for offline transfers, in which case low-value balances and amounts would not be known to financial intermediaries or authorities. The ECB admits that the latter two “desirable options” could be investigated together with European legislators.