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The digital euro will aim to “complement” cash and mimic its best features, a European central banker has told lawmakers, but it may not afford the same level of privacy.
Appearing before the Committee on Economic and Monetary Affairs at the European Parliament on Monday, Fabio Panetta emphasized that there was no intention “whatsoever” to withdraw cash as a means of payment in the Eurozone.
“We would not deprive [citizens] of any option,” he said. “The options that are available today for them to do their payments would be available tomorrow, plus one additional option.”
Panetta is a member of the board of the European Central Bank (ECB), which is spearheading the investigation into the possibility of a digital euro.
Like cash, Panetta said today, a digital euro should be risk-free, accessible, and easy to use.
“We will try to replicate the features of cash that people appreciate, that citizens prefer,” he said. “That is, maximum level of privacy.”
“Of course, this doesn’t mean that the digital euro will have the same level of privacy as cash,” he added. “But certainly we will guarantee the maximum level of privacy.”
Panetta also raised the possibility that some small transactions using the digital euro could be made anonymously.
“We are studying—even though the technology is not mature yet—the possibility of having offline payments, that for limited value payments could give people access to fully anonymous [payments].”
Later in the session, Panetta added that the ECB has neither the desire nor the capabilities to keep track of each person using the central bank-issued digital currency.
“We have proposed there would be no repository in which all the information on digital euro users would be stored. It would be literally impossible.”
A decision has not yet been made on whether the digital euro would exist on centralized or decentralized technology. Panetta said that the architects of the project should be able to remain as “flexible” as possible, while working out what might be the best approach.
Balancing privacy with security
European finance officials and lawmakers have been grappling with the question of privacy and the digital euro since it was first proposed.
Earlier this year, finance ministers from across the Eurozone said privacy was a “key dimension and a fundamental right” in the development of a digital Euro. But they added that the project should comply with other objectives such as upholding sanctions and preventing money laundering, illicit financing, and tax evasion.
Mairead McGuinness, the European Commissioner for Financial Services, echoed this sentiment last week in a debate on the digital euro, saying there was “a delicate balance to be struck between privacy and anti-money laundering requirements”.
The project is one of many digital finance frontiers that the EU is confronting as it updates its rules for the modern world. Last week, parliamentarians passed a landmark set of regulations for crypto service providers known as MiCA.