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It is likely that the European Central Bank (ECB) will choose a centralized solution for its electronic euro.This raises questions about privacy.
Privacy seems to be being left open by the e-Euro developer on their priority list. And experts warn that the solutions being selected could make it difficult for security issues.
No official decision has been made on whether to issue the euro in digital form, but there are clearly plenty of reasons to do so.
Euro finance ministers will discuss the issue on Monday and a Consultation by the European Commission will take place, which could be the first step for new laws in the future.
Ensuring the privacy of the digital euro was the number one issue in last year's consultation. Understand as simple as: Spending data, shopping can reveal sensitive information about tastes, lifestyle,… Of the account holder.
However, research indicates that privacy issues are no longer so important. According to the results based on discussions with the ECB's EU citizens' councils, users also have other concerns, such as security and the scope of payment acceptance, ecb member Fabio Panetta further analyzed the trade-off between targets.
Finance ministers from the currency sector will also make their views at a meeting next week. And they don't want the financial secrets of the new currency to destroy anti-money laundering and tax evasion regulations. Complete anonymity will raise serious concerns, and according to Coindesk, internal regulations will serve as a basis for discussion during the meetings.
This is in line with the ongoing trends in the Cryptocurrency market as the European Parliament begins to be interested in checking customer identities when trading, making payments of small Amounts of Bitcoin, despite industry complaints about privacy issues.
Privacy questions
As a rule, the ECB will have access to the data of transactions to the extent necessary to perform its functions. Such as settling payments and performing financial supervision. But the regulation also states that the payment data warehouse is not fully displayed to any of the centers.
Speaking to the European Parliament's Economic and Monetary Committee on Wednesday that unlike companies just looking for profits, the ECB "has no commercial interest in using this data" and "will respect privacy laws to the end, Panetta brushed off concerns about state surveillance.
He also argued in detail the extent of the level of privacy allowed: The proposed remedial service that allows small payments to be kept secret and offline still depends on government decisions, not the central bank. Privacy is not a technical issue, it is a political issue.
But experts have criticized this argument, warning that centralized management systems are unlikely to guarantee proper privacy. Marina Niforos, an associate professor at hec Paris business school , dismissed Panetta's argument that privacy concerns were only related to data profiteering, and that concerns about government control were entirely true.
"We've seen, in other jurisdictions, that a country's centralized power isn't entirely for good purposes," she added.
Moreover, the control of privacy cannot be based solely on the planning of politicians, but also on the technology chosen. Blockchain's decentralized technology could be the final solution to this ability to create privacy for the digital euro.
This will echo the warning Niforos issued from March to the European Blockchain Commission. The report points out that over-centralised CBDC management means the bank is mass surveillance on a scale that raises deep privacy concerns, and that this fascinating data drive attracts spies and other malicious actors.
But there are also plenty of open-ended questions and grey areas that could prompt the ECB to consider opting for that more decentralized approach. "Blockchain itself is a technology that faces a number of problems" and lacks the "necessary clarity in management and legality," she added.
Is power concentrated?
Panetta seems to be overly biased about the centralized model, when citizen assets are held in the central bank instead of a decentralized system where cash flows can freely circulate.
Speaking on Wednesday Panetta fretted about the consequences of foreigners being able to hold large amounts of the electronic euro – which inevitably happens in the highly dispersed model. However, the solution he is advocating could entail a series of problems.
"It's not a comprehensive solution, it needs to seriously restructure ecosystem settings." Niforos further warned that the banking and regulatory systems in some countries are not really ready for this. The ECB's own research shows that not many people are aware of the digital euro or have a reason to own them, which is the biggest problem to solve. For some, indifference raises concerns about the damage it could do to the cryptocurrency industry in Europe.
"For now, we see the digital euro as a concern rather than an opportunity," said Faustine Fleuret, CEO of French cryptocurrency lobby group ADAN. Fleuret said the plan for the e-euro could undermine progress, which could lead to replacement rather than change.
Euro stablecoins do not have the flexible protocols needed to support decentralized finance. Central banks flocked to issue their own digital currencies due to now-defunct concerns from the industry-backed Libra project. In addition, by preventing supporters of Meta Platform (Facebook's parent company) from participating in the project, some are concerned that the ECB could damage not only privacy but also innovation in the EU.
READ MORE: European Finance Minister: E-Euro will take privacy protections
