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Privacy Concerns Surrounding the European Central Bank’s Digital Euro




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The European Central Bank (ECB) is one of several central banks looking into deploying a central bank digital currency (CBDC). According to research conducted by Washington D.C.-based think tank The Atlantic Council, 130 countries, representing 98% of the world’s total GDP, are currently exploring a CBC. While 11 have launched, 21 are in their pilot phase, and 33 are still in development.

The ECB first published a CBDC report in October 2020 and applied for a trademark in the same month. Since then, the EU’s apex bank has made a few strides toward a Digital Euro, from an investigation phase to a potential testing and possible 2026 launch.

Several arguments favor a Digital Euro, including security of transaction data, better efficiency with intermediaries eliminated, and increased privacy. However, stakeholders have raised multiple concerns, including utility and privacy.

There are several thousand cryptocurrencies currently trading on hundreds of crypto exchanges worldwide. While there are several other reasons why people hold crypto, many will turn to a frequently updated list of volatile crypto assets that could bring returns for knowledgeable investors; their most common use is for investment purposes due to their speculative nature. However, since the Digital Euro functions like a stablecoin, it does not satisfy this common use of cryptocurrencies.

The ECB has touted features of the Digital Euro that support utility. Unfortunately, this sentiment is not widespread. According to the Governor of Austria’s Central Bank, Robert Holzmann, “what is still missing is a convincing storyline for the digital Euro, something which we can put in front of people.”

In addition to unique utility, proponents of blockchain technology and independent cryptocurrencies worry that the Digital Euro will be as controlled as fiat since it is issued by the ECB. To many, the Digital Euro is simply a blockchain version of fiat, with the same possibility of control or interference that exists with fiat currencies.

Evelien Witlox, the ECB’s programme manager for the Digital Euro, has stressed that the CBDC has features that would prevent the ECB from undue interference. According to Witlox, the ECB cannot track data to private users or use programming to restrict or stop people from spending as preferred. However, many remain unconvinced. Witlox has admitted that the ECB is battling a major credibility problem from members of the general public, a serious roadblock to widespread adoption.


An official Digital Euro document somewhat echoes Witlox’s comment. According to the ECB, “user anonymity is not a desirable feature” because it would make controlling the amount of money in circulation difficult. The ECB also says anonymity would make money laundering prevention difficult. Although the apex bank promises to view only the minimum transaction data required for payment validation, these assertions have not done enough to allay public fears.

Fortunately, the ECB is aware of all the work it has to do to gain enough public trust and drive the adoption of the Digital Euro. In April 2021, the ECB published an analysis of a public consultation conducted on the Digital Euro. The survey found that the most worrisome issue, for 43% of respondents, was privacy.

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