The digital euro will protect consumer privacy, according to executive pledges to the European Central Bank

The introduction of a digital euro would enhance consumer privacy and protect the eurozone from the “threat” of competing cryptocurrencies that could undermine the bloc’s monetary sovereignty, according to the central bank that oversees its development.

Fabio Panetta, a member of the European Central Bank’s executive board, told the Financial Times that one of the main goals of the project is to combat the spread of digital currencies created by other countries and companies.

If the central bank participates in digital payments, privacy will be better protected. . . Because we are not like private companies. “We have no commercial interest in storing and managing user data, let alone misusing it.”

“Of course there is a potential risk that could come from others releasing digital payment methods . . . if people want to pay digitally and we don’t offer them a digital payment method, someone [else] You will.”

He compared the digital euro – an electronic version of cash issued by the central bank – to “unstable currencies” such as Diem, Facebook’s Planned digital currency This allows users to send money as easily as text messages.

The last European Central Bank Consultation On the digital euro, people have found that their biggest concern is that it will be undermining their privacy. But Panetta said the central bank has been testing ways to separate people’s identities from their payment details. “The payment will be made, but no one in the payment chain will have access to all the information,” he said.

He said the central bank also tested “offline payments for small amounts, where no data is logged outside the payer’s and payer’s wallets”; Transfers of up to €70 or €100 can be made using the Bluetooth link between the devices.

“For very small amounts, we can allow really anonymous payments, but in general confidentiality and privacy are different from anonymity,” Panetta said, adding that some verifications will be required on most transactions to avoid money laundering, terrorist financing or tax evasion.

‘Batch can be reconstructed [after the event] If the police want to assess whether there is any illegal activity.

Nearly two-thirds of the world’s central banks are experimenting with whether to launch digital currencies, according to Bank for International Settlements.

But commercial banks worry about it Central bank digital currencies It could erode their deposits, especially in times of crisis Morgan Stanley has estimated that up to €837 billion, or 8 percent of eurozone bank deposits, could be converted into digital euros.

Some critics have argued that it may also crowd out money; More than half of German households surveyed by the Bundesbank recently expressed doubts about the digital euro, and frequent cash users were the most skeptical.

Panetta said the digital euro would lead to a “fundamental change in the way payments work, the financial system and society at large,” for example by being “programmable” to allow automated payments, such as toll roads or in the cinema.

But he said the European Central Bank is determined to make sure the digital euro does not undermine the commercial banking system, displace cash, drive out innovation or become a shadow currency in smaller countries.

To achieve this, the company plans to either cap the amount anyone can keep at €3,000 each or impose a “discouraging bonus” above that limit, Panetta said.

The European Central Bank’s Governing Council will meet next month to decide whether to do so to go forward In preparation, Panetta said it could be ready for use in about five years.

He said the central bank will also complete its new supervisory framework on private digital currencies and crypto-asset providers by the end of this year.

Graph showing the average amount of cash in the wallet at the beginning of the day by country

Panetta warned that crypto assets such as bitcoin are “extremely dangerous animals” that are “largely used in criminal activities” and consume “an enormous amount of energy.”

So-called stablecoins like Diem are supposed to be safer because they are backed by fiat reserves, but Panetta said the potential volatility of these reserves created “inherent instability in the function of these coins – which is why they remain unstable coins.”

He said that regulating and supervising crypto assets is difficult “because there is no responsible legal entity.” It is decentralized. They could be in China. They could be in Switzerland or in South America. . . But to the extent that brokers are involved in the supply of these crypto assets, then we will have regulation and oversight in place.”

Panetta said the digital euro should be made available in limited quantities to tourists visiting Europe, but that the European Central Bank should “think very carefully about access, and to what extent, to foreign users.”

Panetta said major central banks are in talks to ensure their digital currencies remain “interoperable,” as this would help “make cross-border payments much more efficient and cheaper.”

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