Digital Euro and payments´ s privacy

Interview with Fabio Panetta, Member of the Executive Board of the European Central Bank, published by the Financial Times about how the works on the Digital Euro are progressing and many other details and implications from its future issuance. For instance, how to find the right balance between people’s interest in digital euro privacy and the necessary checks to make sure that it’s not used for money laundering, tax evasion, etc.

Finding the right balance between people’s interest in digital euro privacy and still do all the necessary checks to make sure that it’s not used for money laundering, tax evasion or other illicit transactions is one of the main concerns revealed by the recent public consultation carried out by the ECB on this theme. During the FT´s interview, Fabio Panetta explains how this concern could be solved by the Digital Euro:

• Central Banks are not interested in monetizing the data of users in digital payments and therefore privacy is going to be better protected. Contrary to private companies, ECB has no commercial interest in storing, managing or monetizing the data of users of a digital means of payment. The ECB is not “a profit-maximizing institution” and the digital euro is in the interest of citizens.
• How the ECB could protect confidential data while allowing the checks foreseen by law to avoid illicit transactions?

‑ Using cryptographic codes, segregating the data between the payer, the payee and the payment operator in a way that codes are not known by them.

‑ Making possible offline payments for small amounts, in which no data are recorded outside the wallets of the payer and payee.

‑ Technology will also allow the payment reconstruction ex post if the police wants to assess whether there’s been any illicit activity. As Fabio Panetta says “in general, confidentiality and privacy are different from anonymity” and remind us “that citizens will still be able to use cash, which guarantees anonymity” and ECB priority is that people feel safe about how their data are used when in Euro digital transactions setting up governance structures to avoid any possible abuse of data.

Regarding the future role of banks in relation to the digital euro, Fabio Panetta explains that the intention of the digital euro is not to change the structure of the financial system: “Banks already provide citizens with a large number of services, and in the future they would add access to the digital euro as one additional service” in the same way they’re already providing access to cash.