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Consumer advocacy organization Finance Watch has urged the implementation of stronger privacy protections for online transactions involving a digital euro, citing growing concerns over increased surveillance.
The European Central Bank (ECB) is expected to announce this month whether it will proceed with the development of a digital euro, following the trend of numerous central banks worldwide, including the Federal Reserve and the Bank of England, in exploring digital currency options to stay ahead in the evolving payments landscape.
The European Commission, the executive body of the European Union, has introduced a draft law that aims to provide a legal framework for the digital euro. However, critics fear that the proposed digital currency could lack the anonymity of physical cash and potentially replace traditional banknotes and coins.
In a policy paper released on Tuesday, Finance Watch argued that a digital euro, accompanied by robust privacy and data protection measures, could reduce European citizens’ reliance on a limited number of dominant payment companies and Big Tech platform operators. It could also help prevent further market consolidation.
Finance Watch acknowledged that some concessions may be necessary to prevent the digital euro from being used for money laundering, making it challenging to achieve complete anonymity in digital payments. However, the organization contended that the proposed EU law currently grants higher levels of privacy to offline usage of a digital euro stored in a customer’s wallet.
While acknowledging that the proposed approach for offline transactions resembles the privacy associated with cash transactions, Finance Watch emphasized the need for enhanced privacy and data protection, particularly for small, low-value online transactions.
The draft law is currently under review by EU member states and the European Parliament. EU financial services chief Mairead McGuinness advised against rushing the legislative process, highlighting the importance of addressing public concerns about potential government surveillance associated with digital currencies. The Bank of England has similarly stressed the need for a “national conversation” to address such fears regarding a digital version of the pound.
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