When it comes to CBDCs, one of the main public concerns rests on the potential encroachment on privacy. The European Central Bank (ECB) recently published a presentation specifically addressing this issue, stating that the Eurosystem should only be able to view minimal transaction data, but user anonymity is not a desirable design choice. Is.
three privacy options
In response to the concern of EU citizens over the privacy issues involved in CBDCs, the ECB’s presentation includes three different privacy options to be adopted for digital currencies.
First, the current baseline scenario, similar to digital transactions through private banks, would allow digital euro intermediaries such as banks to access transaction data, whereas the ECB did not. The presentation explained that such transparency is “aimed at combating anti-money laundering and the financing of terrorism (AML and CFT).”
The bank has labeled other options as a “desirable” path for its digital currency. A higher level of confidentiality will be allowed for low-value/low-risk payments, meaning “simplified checks” on transactions. However, standard controls will still apply to high-value payments. The document did not specify the eligible limit for such payment type.
The last option provides the highest level of confidentiality, making transactions and balances non-transparent to intermediaries and central banks. The bank noted that this offline option may be available only for low-value/low-risk payments.
crypto enterprise consultant Patrick Hansey described The offline payment landscape is “very close in principle to physical cash payments.”
Anonymity is not desirable
Stating that the Eurosystem should only have limited access to transaction data, the bank explicitly stated that user anonymity is not a desirable feature due to concerns related to money laundering.
The presentation raised a potential trade-off between privacy and the EU regulatory framework, as implementing AML measures erodes users’ financial privacy. Hansey said one of the highlights from the presentation is that the central bank has outlined how far it can go to protect user privacy.
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