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In response to the European Central Bank’s recent announcement that it has entered the preparation phase for the digital euro, the European Data Protection Board and the European Data Protection Supervisor are recommending revisions to EU draft legislation to elevate privacy standards.
The data protection watchdogs are suggesting that the regulations governing the future Central Bank Digital Currency (CBDC) “further define” the data protection responsibilities of the European Central Bank (ECB) and payment service providers.
Moreover, they are “strongly recommending” the implementation of a “privacy threshold” for online transactions to ensure that neither offline nor online low-value transactions are scrutinized for anti-money laundering (AML) purposes.
The need for a singular access point to verify whether digital euro holdings exceed the maximum allowable amount is also questioned by these watchdogs. They argue that “technical measures allowing for decentralized storage of these identifiers are feasible as an alternative.”
The ECB is transitioning into a two-year preparation phase to finalize the digital euro rulebook, select potential providers for a digital euro platform and infrastructure, and conduct testing and experimentation to create a digital euro that aligns with the Eurosystem’s requirements. The objective is to meet user needs in areas such as user experience, privacy, financial inclusion, and environmental impact.
It is emphasized that the issuance of a digital euro will only be considered by the Governing Council once the EU’s legislative process is complete. ECB President Christine Lagarde envisions a digital euro that functions as a digital form of cash, suitable for all digital payments, free of charge, and adhering to the highest privacy standards. This digital currency would coexist with physical cash, which will continue to be available to ensure inclusion for all.
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