According to CryptoPotato, the European Central Bank (ECB) issued an update on June 25 regarding the two-year preparation phase for the European Central Bank Digital Currency (CBDC), set to conclude by October 2025. The ECB emphasized that privacy and data protection are its primary concerns. However, certain features of the digital currency have raised concerns about potential privacy violations.
Prominent cryptocurrency entrepreneur and investor Daniel Batten highlighted these concerns on June 26. He pointed out that the digital euro could enable banks to monitor individuals, delete them from their platforms, and freeze their accounts. Additionally, the ECB plans to limit the amount of digital euro individuals can hold in their accounts. The ECB stated that these limits aim not to prevent the digital euro from serving as a store of value but to moderate its use in that capacity, ensuring banks can effectively provide credit to the economy.
The digital euro is fundamentally programmable money on a blockchain governed by smart contracts, giving the central bank control over the amount of currency individuals can hold. The ultimate goal is to phase out cash and move all financial transactions online, where they can be monitored and traced. Batten previously stated that the ECB, among other central banks, is working to undermine cryptocurrencies and financial freedom.
The digital euro also features an "offline function" intended to provide users with a level of privacy akin to cash, allowing for offline payments using pre-funded accounts. However, critics point out that this still requires the use of a central bank database, potentially compromising the claimed privacy.
A final decision on issuing the ECB's digital currency will only be made after completing the legislative process within the European Union and concluding the preparation phase. When the preparation phase began in October 2023, fintech entrepreneur Kim Dotcom warned against using the digital euro, describing it as a tool for financial surveillance and control.
Europe, along with many other countries, is actively moving towards phasing out cash and transitioning to centrally controlled digital currency. According to the Atlantic Council, only three countries - Nigeria, the Bahamas, and Jamaica - have issued central bank digital currencies so far. Currently, there are 36 pilot projects for central bank digital currencies underway globally, including in Europe, China, Russia, Brazil, India, Japan, South Africa, and Australia.