Privacy Concerns Arise as Digital Euro is Set to be Free to Use

The European Central Bank (ECB) has announced that the Digital Euro will be free to use and accessible to all, but personal information privacy will be determined by legislators.

In a statement on January 23rd, Fabio Panetta, a member of the ECB’s Executive Board, said: “It will then be up to you, the co-legislators, to establish the optimal balance between the protection of privacy and the achievement of other important objectives of a public nature.”

The executive mentioned the importance of achieving public objectives, such as the fight against money laundering, the financing of terrorism, and tax evasion or compliance with any sanctions.

Instead of a direct-to-central bank model, researchers have recommended a supervised intermediary approach for the digital euro.

Furthermore, the ECB believes that supervised intermediaries are in the best position to identify use cases for conditional payments and other advanced payment services.

The ECB could develop its own standalone payment app or allow private banks to incorporate the digital euro into their systems as intermediaries.

Moreover, the ECB began studying the digital euro in October 2021 and hopes to complete the preliminary phase of the project by 2023.

The European Commission is also expected to submit its legislative proposal regarding the currency this year. However, as Panetta stated, the ECB would continue the currency’s investigative phase throughout the year.

Panetta added: “The priority of the digital euro project has always been clear: to preserve the role of central bank-issued money in retail payments while offering users the option to use it even where this is not possible today, such as in e-commerce.”

Initial testing of the Digital Euro token EURM is already underway in Spain with a small group of applicants.

However, the Eurogroup of the European Council said on January 16th that future digital euros will not be programmable and will convert to traditional assets automatically.