ECB Favors Transparency Over Privacy in Digital Euro Design, Presentation Reveals

The European Central Bank (ECB) is leaning toward a “transparent” digital euro, rather than one that provides greater privacy for its users, according to a presentation on the project. In the document, monetary authorities consider various options for the privacy of the eurozone’s digital fiat.

User anonymity is undesirable for the digital euro, says ECB

A presentation by the European Central Bank shed light on the regulator’s “preliminary views” on privacy-related features of the digital euro. This came at a time when the central bank’s digital currency project (CBDC) in the eurozone is still in the research phase.

While acknowledging that maintaining control over personal data and protecting privacy as a fundamental right is important to Europeans, monetary authorities have nonetheless noted that the move to digital payments implies less privacy by default. This is despite the possibility of retaining some cash-like features in the digital version of the euro.

The ECB report highlighted privacy as a key concern for future users of the digital euro, but the bank now says privacy needs to be evaluated in the context of other EU policies. Among these are anti-money laundering (AML) and combating the financing of terrorism (CFT). Clarifying this issue, the regulator states:

User anonymity is not a desirable characteristic because it would make it impossible to control the amount in circulation and prevent money laundering.

Digital euro data should be transparent, not private

The European Central Bank insists that the Eurosystem, consisting of the ECB and the central banks of eurozone member states, should have access to digital euro transaction data to confirm payments. In addition, the anonymized aggregated data should be available for statistical and supervisory purposes, as well as for anti-fraud and anti-crime purposes.

In a presentation , brought to the public’s attention this week by cryptocurrency venture advisor Patrick Hansen, the ECB lists three privacy options for the digital euro platform. The first, called the “currently applicable baseline scenario,” aims to ensure transparency of personal and transactional data for intermediaries that must comply with AML/CFT regulations.

The second approach would provide greater privacy for low-value payments, while the latter provides privacy for offline transfers, in which case the balances and amounts of low-value payments would not be known to financial intermediaries or authorities. The ECB acknowledges that the latter two “desirable options” could be explored with European lawmakers.

Image Credits: Shutterstock, Pixabay, Wiki Commons