CBDC’S Designers in Europe Battling Confidentiality Problems

Experts have warned Europe Central Bank Digital Currency CBDC’s designers that the recent design models being adopted could make privacy difficult to achieve. No formal policy decision has been presented to issue the euro in a digital format; however, significant speculation has fuelled the idea. The matter was to be discussed effectively by Euro finance ministers and advice obtained from the European Commission.

Last year, a consultation carried out by the European Central Bank identified that ensuring that a digital euro protects citizens’ privacy is its top priority. An individual’s spending habits could disclose private information such as lifestyles, political affiliations, and tastes.

However, as things stand, privacy issues don’t seem to concern European CBDC’s designers. Emphasis has been placed on other contending apprehensions citizens might have, e.g., worldwide acceptance and safety. In addition, Fabio Panetta, a European Central Bank board member, recently added a “Trade-off” to those objectives.

A policy that was to form the basis of the discussion when the finance minister met to discuss the issue argued that a fully anonymous digital currency would bring up stern concerns.

Queries on Privacy

The policy says that the European Central Bank would be granted access to all transitions to fulfil its duties. These duties include settling payments and overseeing financial transactions, among others. In addition, the policy adds that payment data should be made available to all central entities for oversight purposes.

Panetta dismissed snooping claims by the state as the motive behind this policy. He added the European Central Bank has no interest in using the data provided for commercial gain. Panetta said that, unlike firms whose only motive is making a profit, the ECB would follow the laws in the policy to the latter.

According to Panetta, privacy is more of a political issue than a technical problem. He made this statement after a suggestion was made to make small transactions and payments offline and let them remain a secret. He added that that was a matter to be decided by governments and lawmakers, not central bankers.

However, experts have warned against Panetta’s characterization, saying that an over-centralized financial system makes it almost impossible to attain and maintain high privacy levels. Marina Niforos, a professor at HEC Paris business school, told CoinDesk that citizens had a right to worry about the amount of data controlled by the government. She also dismissed Panetta’s claims that privacy concerns were tools of profit-driven firms. Niforos warned that the move was not as easy as it sounded. It requires an intense ecosystem-remaking that some nations were not ready for.

A study by ECB revealed that many people have no idea what a digital euro is or how one would use it; this is one of Panetta’s major obstacles. Faustine Fleuret, the CEO of ADAN, told CoinDesk that the digital euro was more of a risk than an opportunity. He added that the digital euro could hinder innovation by displacing euro stablecoins without fluid rules required to sustain decentralized finance.

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