Digital Euro: New proposals for data protection and anonymity

Digital Euro: New proposals for data protection and anonymity

The digital euro is getting closer and closer. The European Central Bank (ECB) is currently studying the benefits and implementation of the project and will do so by October. However, it is certain that the central bank will introduce a digital currency, and the EU Commission has already made proposals for the legal basis of the digital euro.

The Commission's draft law contains a total of 42 paragraphs and covers various aspects of the digital euro, from issuance and control to data protection. Member states have until August 11th to provide feedback, while the deadline for the EU Commission is September 7th.

A main criticism regarding the digital euro is privacy. Many citizens are concerned that a digital European currency, similar to that in China, could endanger their privacy. In an ECB survey, 43 percent of respondents said that privacy should be the top priority for the digital euro. Finance Minister Christian Lindner (FDP) supported this view.

The EU Commission is responding to these concerns and wants to add an offline function to the digital euro. Up to a certain threshold, it should be possible to make payments without the ECB collecting personal data. Only information such as transaction value would be shared. Even for online payments, the central bank only wants to collect the most necessary information.

It is also important to note that the digital euro should not be considered “programmable money”. The ECB should have no influence on what the digital currency is used for. However, this does not exclude the possibility of programmable payments that can be processed automatically, similar to smart contracts.

Benedikt Faupel from the digital association Bitkom welcomes this idea and calls for it to be pursued further in order to ensure real interoperability. One possibility for this could be blockchain technology, which, however, is not mentioned in the Commission's current draft.

However, it remains unclear what specific benefits the digital euro will have for end consumers. Although the privacy features may be attractive to many citizens, there are already numerous private payment solutions such as Google Pay, Apple Pay and PayPal. FDP member of the Bundestag Frank Schäffler expressed criticism and emphasized that the ECB had not yet sufficiently explained why a digital euro should make sense for citizens in Europe.

Overall, there are still many open questions in connection with the digital euro. Experts assume that the discussions will not be completed until after the European elections next year. However, the EU Commission is already planning to introduce the digital euro in 2026, although compliance with this schedule is questionable.