The development of a new digital euro is accompanied by an active discussion of its privacy. There is a possibility that the ECB will choose a centralized solution for the renewed currency. Hence, there is an increasing awareness of the feasibility of such a choice and possible control of users’ costs.
Is privacy not on trend?
Over the past year, the ECB held a number of consultations that had focused on the privacy of the digital euro. This is not surprising, because cost data can reveal a lot about a person from taste preferences to political opinions.
To date, there are no official political decisions on the digital euro format. However, the discussion of this topic by eurozone finance ministers and the planned consultation with the European Commission indicate a high likelihood of adopting new laws.
The complete anonymity of the digital currency can lead to increased money laundering and tax evasion. At the same time, centralization will lead to the need for identity verification when making even small payments, which is perceived by most owners of digital assets as an invasion of privacy. In this regard, finance ministers face a difficult task – to find a compromise that will suit both the financial system and EU citizens.
According to preliminary data, the ECB will have access to transaction data exactly to the extent required to perform its functions – settlement of payments and financial supervision. It states that payment data should not be fully available to any central services.
Commenting on the potential surveillance of citizens, ECB board member Fabio Panetta said there is no commercial interest in using this data and privacy laws will be fully respected. He noted that the degree of confidentiality is not a technical, but a political issue, and it should be determined by governments of states.
Marina Niforos, Affiliate Professor at HEC Business School, contrary to what Fabio Panetta claims, believes that users’ concerns and suspicions about the accumulation of such a large amount of data by government organizations are well founded.
State actors “have fewer commercial motives, but it doesn’t mean that there’s no danger of misappropriation and misuse of this data,” she said.
The expert also drew attention to the fact that privacy management depends not only on the wishes of politicians, but also on the chosen technology. Probably the only optimal solution for the digital euro can be distributed blockchain technology.
Is the digital euro a threat to the EU?
“At the moment, we see it [the digital euro] as more of a threat than an opportunity,” said Faustine Fleuret, CEO of French crypto industry lobby group ADAN. In her opinion, the main danger of the new digital euro lies in replacing, but not complementing stable euro coins without the flexible protocols that decentralized finance requires. It endangers not only the privacy of users, but also innovations in the EU as a whole.