On June 25, the European Central Bank announced the latest situation of the two-year preparation phase of the digital euro CBDC. This phase is expected to last until October 2025. In the announcement, the central bank emphasized the importance of privacy and data protection, but at the same time, some currency characteristics raised concerns about possible privacy violations.

Dual concerns about privacy and surveillance

Daniel Batten, an entrepreneur and investor in the cryptocurrency space, criticized some of the features of the digital euro on June 26. Although the ECB claims to make privacy and data protection a top priority, Batten pointed out that some features of the digital euro could bring about the opposite results of the central bank's statements, raising public concerns about financial surveillance.

These concerns highlight the key issues that need to be balanced in the development of digital currencies: how to improve financial efficiency and security while protecting users' privacy rights. As the digital euro develops further, these issues will undoubtedly continue to be the focus of discussion among the public and regulators.

Digital Euro: A double-edged sword for central bank surveillance

The digital euro CBDC, as a currency on the blockchain, is managed by smart contracts and has programmability, which enables the central bank to impose limits on the amount of currency held by individuals.

The ECB aims to gradually phase out cash and digitize all financial transactions by limiting the number of digital euro account holdings, in order to enhance the monitoring and tracking capabilities of financial transactions. The central bank claims that these restrictions are not intended to prevent the digital euro from being used as a tool for storing value, but to moderate its use in this regard to maintain the stability of the financial system.

However, critic Batten pointed out that such restrictions could make it easier for banks to monitor personal financial activities and be able to cancel services or freeze accounts when necessary, which could threaten financial freedom. He has said that the ECB is involved in actions to restrict cryptocurrencies and financial freedom.

Although the ECB claims that the digital euro has offline capabilities and can provide the same privacy protection as cash without the Internet, observers believe that since such offline payments still rely on the central bank's database, its actual privacy protection effect is limited.

In addition, the decision on whether to issue a digital euro will depend on the completion of the EU's legislative process and preparatory phase. Fintech entrepreneur Kim Dotcom warned that the digital euro could become a financial surveillance tool that, once combined with digital identity and social scoring systems, could result in funds being frozen because of an individual's words and deeds.

Global expansion of CBDC trials

As the world shifts toward a digital financial system, pilot projects for central bank digital currencies (CBDCs) are increasing. Europe and some other countries are actively promoting the transition from cash to digital currencies, and currencies controlled by central banks are gradually becoming mainstream.

According to a report by the Atlantic Council, only three countries in the world have officially deployed CBDCs: Nigeria, the Bahamas, and Jamaica. However, this number is growing rapidly, and there are currently 36 CBDC pilot projects underway around the world.

These pilot projects cover multiple countries and regions, including but not limited to Europe, China, Russia, Brazil, India, Japan, South Africa and Australia. These pilot projects not only demonstrate the development and application of CBDC technology, but also reflect the active exploration and preparation of central banks in various countries for the digitalization of the future financial system.

As CBDC pilots continue to increase, we can foresee that digital currencies will play an increasingly important role in the global financial system in the next few years. At the same time, this will also pose new challenges and considerations to monetary policy, financial supervision, and personal privacy protection. #数字欧元 #CBDC #隐私保护 #监控

Conclusion

The digital euro CBDC and its CBDC pilot projects around the world mark the advent of a new era in the financial sector. The development of these digital currencies aims to improve transaction efficiency and security, but it also raises concerns about privacy protection and financial surveillance. In this process, the ECB and other financial institutions must ensure that technological innovation does not erode individual freedoms, while developing a solid legal and policy framework to protect user rights and respond to new challenges.

As digital currencies gradually become an important part of the financial system, regulators, fintech companies and consumers need to work together to ensure that this transformation promotes inclusive economic growth while maintaining the stability of the financial system and the privacy rights of users. This requires us to find a balance between innovation and regulation and jointly shape a new era of digital finance that is both efficient and secure.