The European Central Bank (ECB) has pledged to introduce upgraded privacy measures for the digital euro, ensuring robust data protection and privacy standards.

The proposed regulation aims to establish a single access point to verify users’ digital euro holdings, i.e. holding limits.

The ECB, in collaboration with the European Data Protection Board (EDPB) and the European Data Protection Supervisor (EDPS), has developed recommendations for maintaining strict personal data protection.

The recommendations include processing only necessary personal data, avoiding excessive concentration of such data, and introducing so-called privacy thresholds for online transactions to curb tracking for anti-money laundering purposes.

What is a digital euro?

The digital euro aims to facilitate electronic payments between individuals both online and offline, while prioritizing privacy and data protection.

On January 21, the European Central Bank allocated more than $700 million to advance the development of the offline digital euro. The move is part of a broader strategy to launch a digital euro, a European payment method that can be used for digital transactions throughout the euro area free of charge.

Importantly, the Eurosystem, as provider of the digital euro infrastructure, will not be able to identify the identities behind digital euro transactions and only payment service providers will have access to such information.

Amid growing concerns about privacy, the European Central Bank has pledged to improve privacy standards through a digital euro, bringing relief to supporters of central bank digital currencies (CBDCs).

Offline transactions using the digital euro are intended to mimic the discretion of cash transactions, protecting the details of transactions between payers and payees. In contrast, online transactions will involve the ECB processing a minimal amount of pseudonymous data, mainly for basic functions such as settlement, giving users unprecedented control over their information.

The currency is designed with a focus on financial stability and is expected to be interest-free and subject to limits on public holdings, reflecting the ECB’s deliberate strategy to ensure its compatibility with traditional banking institutions rather than acting as a competitor.

Furthermore, the innovative solution seamlessly connects digital Euro wallets with bank accounts, streamlining transactions without the need to pre-fund the wallet.

CBDC criticism

While people are excited about digital progress, there are also different voices expressing caution.

Critics such as European Parliament member Cristian Terheş have expressed concerns about the potential for excessive government control and the potential erosion of privacy associated with digital currencies.

The concerns highlight the delicate challenge the ECB faces between embracing digital advances and safeguarding individual freedoms.

CBDC: The US Perspective

CBDC has attracted widespread attention around the world as many countries are exploring and launching pilot projects. As of March 2023, 11 countries have launched CBDCs and more than 20 central banks have launched pilot programs.

However, in the United States, the role of CBDCs has not been widely accepted due to concerns that they could empower top banks and governments to monitor transactions in real time. This raises questions about the delicate balance between personal privacy and government transparency.

In January this year, former US presidential candidate Vivek Ramaswamy, who suspended his 2024 presidential campaign and endorsed former President Donald Trump, expressed concerns about CBDCs in an interview with Bloomberg.

Ramaswamy has advocated for significantly reducing the scope and size of federal agencies such as the U.S. Securities and Exchange Commission (SEC).
#数字欧元  #隐私安全