According to a presentation published by the European Central Bank (ECB), it is important for future users of the digital euro to have control over their personal data and to be confident that their privacy will be maintained. However, the regulator notes that switching to digital payments by default means reducing data privacy. The priority for the ECB is to ensure transparency of digital euro transactions, as the anonymity of users will not allow control over the funds in circulation. As a result, the regulator’s efforts to combat money laundering (AML) and terrorist financing will be fruitless.
The presentation states that the ECB and other central banks from across the EU should have access to digital euro transaction data to verify payments. This hidden aggregate data should be available to analyze statistics, as well as to counter fraud and crime. ECB researchers presented several levels of digital euro privacy. The basic level involves verifying customers at the time of registration, and their personal and transaction data will be available to intermediaries to ensure compliance with AML rules.
Low-value payments (low-risk transactions) involve a higher degree of privacy. This includes simplified checks, including the creation of a special wallet with less stringent registration requirements. Digital euro transactions of larger amounts will be subject to standard controls. Digital euro also provides for offline transactions, the data on which will not be available to intermediaries or the central bank. However, to prevent the risks of illegal activity, offline digital euro payments will remain confidential only for contactless payments at close range.
In March, the ECB said that for the successful implementation of the digital euro, it must be accepted by all retail outlets in the euro zone. Last year, ECB executive committee member Fabio Panetta said the central bank’s digital currency should be used as a means for payments, not savings, to avoid hurting commercial banks.