ECB can provide future digital euro users with acceptable privacy protections that are better than those of private companies. This opinion, during an interview for the Financial Times, shared one of the regulator’s representatives, Fabio Panetta. Frequent companies, in his opinion, are not able to repeat the result of the regulator.
Among the arguments in favor of providing the ECB with a solution to confidentiality problems, Fabio Panetta noted the special attitude of market participants to the involvement of regulatory authorities in the work on such tasks. According to his observations, people feel more secure when their information is processed by government rather than private institutions.
“There are many ways that we [the ECB] can protect confidential data while allowing us to carry out statutory checks to avoid illegal transactions, including those related to money laundering, terrorist financing or tax evasion”, Fabio Panetta commented on the ECB’s capabilities.
Panetta considers private stablecoins like Facebook’s Diem “potential threats” to monetary regulators. In his opinion, they can change the attitude of consumers towards digital tools. “If people want to make digital payments, and we don’t give them this opportunity, someone else will do it”, he said.
Users are prioritized for digital payments with a high level of privacy
Earlier, the ECB conducted a study that showed that 43% of users consider high privacy a priority for digital payments. It is also worth considering that 18% of respondents emphasized the need for a digital euro to ensure secure payments. 11% of respondents focused on cross-border payments within the EU. 9% of respondents emphasized the need for low fees. And 8% of respondents would like to be able to use this system in a mode offline.
At the moment, European regulators are busy testing the digital euro. The official said that the ECB has already conducted pilot tests of offline payments with digital euros for small amounts. In such transactions, user data isn’t transferred outside the wallets of the sender and recipient of funds. Communication between them carried out via bluetooth.
The ECB’s digital euro will be the central bank’s digital currency (CBDC). According to ECB President Christine Lagarde, the launch will take at least four years. Panetta believes that it will take two years to develop the architecture of the coin alone.
In a June 2 report, the ECB said governments ditching CBDCs risk exposing their financial systems and monetary autonomy to risks from the expansion of “foreign tech giants”.
Panetta didn’t explain how the digital euro would protect privacy. He only assured that the ECB would not seek to obtain user data like private companies.
Is the digital euro privacy promise worthless?
While the ECB seems to be saying the right thing about a potential CBDC deployment, not everyone agrees that the end result will be as rosy.
Former Apple product manager and now COO of Oasis Labs, Anne Fauvre-Willis, said the EU has proven its commitment to consumer privacy in the past. But that means little if the digital euro issued in a centralized system.
The possibility that the central bank will transfer all control of its money supply to a decentralized network seems highly unlikely.
Thus, she believes that the ECB may just pay lip service to the concept of privacy in relation to the digital euro.