EU finance ministers have called for the digital euro to offer both privacy and transparency, as central bankers start testing the scheme this year.
The digital euro is being driven by the European Central Bank (ECB), with the primary idea launched in October 2020 and a more formal “survey” of the project deployed in 2021.
The Eurogroup, which includes the finance ministers of European Union countries using the common currency, has since held regular discussions on the subject.
In a statement Following their last meeting, Eurogroup members set out priorities for central bank digital currency (CBDC), should the ECB decide to move forward. The actual issuance of a digital euro would depend on the outcome of EU legislation.
Members indicated how such a CBDC could strengthen the autonomy of the Bloc, in addition to offering citizens and businesses a host of advantages.
Importantly, the European Central Bank would continue to serve as “an anchor for our monetary system,” the statement said.
The digital euro: balancing privacy
Yet there is still much to decide on what the digital euro would look like. The latest Eurogroup statement highlighted a key tension between user privacy and anti-crime measures.
“To succeed, the digital euro must ensure and maintain the trust of users, for whom privacy is a key dimension and a fundamental right,” the statement said.
“At the same time, the Eurogroup also considered that the design of a digital euro should be in line with other policy objectives such as the prevention of money laundering, illicit financing, tax evasion and ensuring compliance with sanctions.”
The group suggested that one solution would be to allow those making “less risky transactions” more privacy.
Other issues raised in the most recent discussions include the potential environmental impact of a digital euro, as well as the belief that it should not replace cash but complement it.
The group also gave an overview of the features the digital euro could have to make it competitive with traditional online banking services, saying it supported exploring an offline function and scheduling payments to be completed. when certain conditions are met.
What happens next?
The European Commission intends to table a proposal in the first half of this year that will establish the digital euro and regulate its main features.
Meanwhile, the European Central Bank is carrying out a prototyping exercise for the digital euro. Five companies—CaixaBank, Worldline, EPI, Nexi and Amazon—have been selected participate in the exercise, each focusing on a specific use case for the CBDC.
The ECB’s investigation phase should be completed in the fall, and a decision will then be made on whether or not to continue with the project.