ECB Drafts Privacy Options for Its Planned CBDCs
- ECB publishes three main privacy options for the design of its CBDC
- Market observers criticize the ECB’s privacy options plan
The European Central Bank (ECB), the arm of the European Union (EU) that works with the central banks of member nations, has published three main privacy options that are being considered for the design of its Central Bank Digital Currency (CBDC).
In a nine-page report, which is a result of the ECB’s consultation with the public from last year, ECB said that CBDCs will be designed such that they imitate current digital transactions where only intermediaries like commercial banks will have access to transaction data.
The second privacy option will allow for selective privacy by making low-value/low-risk transactions to be devoid of information collection by intermediaries.
On the other hand, the last privacy option will allow for even greater privacy by enabling offline functionality for low-value/low-risk transactions.
As per the ECB, while each option requires user checks by intermediaries and central banks during onboarding, the first scenario is the currently applicable baseline it is working with.
The report also added that for the ECB, user anonymity is not a desirable feature, as it would make it impossible to control the amount of the CBDC in circulation and to prevent money laundering.
Market observers oppose the ECB
Meanwhile, market observers are criticizing the presentation. Patrick Hansen, a crypto venture adviser, and a regular commentator on the EU digital currency policy took to Twitter and said that the options do not offer any significant benefits over already existing digital means of payments.
He said that the ECB is only willing to go to a certain extent to implement user privacy, which means that the digital Euro is not likely to replace the properties of cash in the digital world.
“And if it can’t perfectly replace the properties of cash in the digital world, this naturally raises the big question, at least for me personally, of what use/benefit a central bank digital euro offers vs. existing digital means of payments?” he said.
However, Hansen acknowledged that the ECB is considering the privacy options at all and the trade-off in AML and CFT control they would mean.