EU Ministers Claim Digital Euro Could Introduce Additional Privacy Safeguards

European governments are debating policy possibilities for a CBDC, but no formal decision has been made to launch one.

By Shomik Sen Bhattacharjee | Updated: 5 April 2022 19:21 IST

EU Ministers Claim Digital Euro Could Introduce Additional Privacy Safeguards

Photo Credit: Facebook/ Paschal Donohoe

A new Digital Euro will likely offer more privacy for smaller transactions

Highlights

A Digital Euro issue could take a while to arrive
The European Parliament recently passed new AML rules
EU ministers want the Digital Euro to accommodate privacy concerns

European Commission lawmakers believe that the Digital Euro — the EU's planned Central Bank Digital Currency (CBDC) could facilitate enhanced privacy for small value transactions. With the likelihood of CBDCs playing a major role in global finance very soon, the European Union (EU) is working aggressively towards coming up with a solution that ties payment innovations to its anti-money laundering (AML) rules — rules that will apply to the Digital Euro as well as private cryptos. That said, there haven't been any formal decisions within the EU on whether a Digital Euro will be issued soon.

On Monday, finance ministers from the EU bloc said that Digital Euro will bring enhanced privacy for smaller transactions. However, they noted that chances of complete anonymity are still off the table.

Speaking to the press, Irish Finance Minister Paschal Donohoe said that Digital Euro should “accommodate privacy concerns”. He added that new rules will also be “counteracting the use of digital euros for unwarranted purposes”. Donohoe further suggested, "A risk-based approach could be followed allowing for more privacy for less risky and smaller transactions and vice versa."

Fabio Panetta, a prominent European Central Bank (ECB) executive board member has further added that the Digital Euro “would provide people with a level of privacy equal to or higher than that of private digital solutions."

Lawmakers at the European Commission will do further consultations on legislation that would be required to support the new Digital Euro. But the Commission further warned that an unduly centralised system could aid spying and continue being a mass surveillance menace, reports CoinDesk. Furthermore, EU lawmakers have been proposing AML checks for crypto and stablecoins.

European Commission's Paolo Gentiloni said, "A completely anonymous Digital Euro is not desirable”. Last week the European Parliament passed a controversial rule on digital assets which mandates exchanges to collect the sender and recipient's private information even for small value transactions.

The ECB is also working out a way to introduce Digital Euro as a payment option. It added, “We are getting a clearer picture of what citizens and merchants want, so we can fine-tune all the design features of a digital euro before any potential issuance. Legislators have a key role to play."

Christine Lagarde, President of the European Central Bank (ECB) earlier said (via CoinDesk) that the ECB needs to expedite the process on Digital Euro.

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