Digital Euro’s privacy options leave experts unenthusiastic

KEY POINTS

  • ECB publishes three privacy options for the digital euro
  • Market watchers come out to criticize the presentation
  • The EU has already proposed many changes in digital currency policy

The European Central Bank (ECB) has published three main privacy options that it is considering for the design of its Central Bank Digital Currency (CBDC).

The report, which is a result of the ECB’s public consultation last year, said that CBDCs will be designed in a way that mimics current digital transactions, where only intermediaries such as commercial banks will be able to access transaction data.

The next privacy option will enable selective privacy as it will make low-value/low-risk transactions devoid of information collection by intermediaries.

The third privacy option will allow for even greater privacy by enabling offline functionality for low-value/low-risk transactions.

According to the ECB report, while each option requires user verifications by intermediaries and central banks during integration, the first scenario is the currently applicable baseline that it is working with.

The ECB, in the report, noted that user anonymity is not a desirable feature as it would make it impossible to control the amount of CBDC in circulation and prevent money laundering.

Meanwhile, market watchers criticized the presentation. On a tweetPatrick Hansen, a crypto asset consultant, noted that privacy options do not provide significant benefits over existing digital payment methods.

He further said that the ECB is only willing to go so far to implement user privacy, which means that the digital euro is unlikely to replace the properties of money in the digital world.

“And if it cannot perfectly replace the properties of money in the digital world, this naturally raises the big question, at least for me personally, what use/benefit does a central bank digital euro offer versus existing digital payment means? ,” he said.

However, he appreciated the fact that the ECB is considering the privacy options and the switch in AML and CFT control they would mean.

This year, the European Union has already made several digital currency policies, including drafting a rule to increase monitoring of digital currency transactions, requiring exchanges and custodial wallet operators to collect user information.

The illustration shows representations of the Bitcoin cryptocurrency A depiction of the Bitcoin cryptocurrency is seen in front of a stock and US dollar chart in this illustration taken on January 24, 2022. Photo: Reuters / DADO RUVIC

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