When European Central Bank board member Fabio Panetta addressed the European Union Committee on Economic and Monetary Affairs in April, he emphasized the importance of privacy in any potential future CBDC rollout.
The ECB had conducted a public consultation on the possibility of a digital euro, canvassing the opinions of over 8,000 individuals and businesses. The responses that came back suggested privacy was the number one concern surrounding the issuance of a central bank digital currency.
With 43% of respondents highlighting privacy as the core requirement, Panetta declared that the digital euro could meet those requirements without relaxing security standards.
Other responses from the survey highlighted the need for a digital euro to provide secure payments (18%), while others focused on cross-border payments within the European Union (11%). Some respondents highlighted the need for low fees (9%), and the ability to use the system even if it’s offline (8%).
“As I have already mentioned, privacy emerges as the most important feature of a digital euro. Protecting users’ personal data and ensuring a high level of confidentiality will therefore be a priority in our work,” said Panetta.
Indeed, the ECB has been exploring privacy enhancing techniques since even before the concept of a digital euro emerged. Preliminary research suggested that a digital system could still be monitored for illicit activity, while still allowing for transparency and privacy.
But while the ECB appears to be making all the right noises concerning a potential CBDC rollout, not everyone agrees that the final outcome will be so rosy.
Former product manager at Apple, and now chief operating fficer of Oasis Labs, Anne Fauvre-Willis, said the EU had proven amenable to the concept of consumer privacy in the past. But that won’t count for much if the digital euro is issued on a centralized system.
“The EU has had a good track record around consumer privacy but it’s still a centralized system,” Fauvre-Willis told Cointelegraph, adding, “Instead of enabling this via a centralized bank, why not empower a decentralized protocol to do this instead?
Were a digital euro to be issued on the Ethereum blockchain for example, it would be subject to the same level of decentralization and autonomy as Ether (ETH), and every other token issued via Ethereum.
But the possibility of a central bank ceding all control of its money supply to a decentralized network seems extremely unlikely.
What’s more, the natural desire for human beings to take the easiest path available could see users flock to the digital euro, regardless of how much privacy they give up in the process, says Fauvre-Willis.
“In regards to people adopting the digital euro, unfortunately I think ease will win over privacy alone,” said Fauvre-Willis.
“Privacy is a feature but it’s not enough to drive people on its own to change their behavior. Instead for those of us who really believe in privacy we have to simultaneously strive to make compelling and life changing products and as we do we need to put privacy at the center of what we make,” she added.
The ECB is still conducting research into the possibility of a digital euro, with the final decision expected to be made by summer 2021.
Julia started off her career as a travel blogger, hitchhiking and exploring the world as a nomad. After many years of traveling with little to nothing on her, volunteering, and waiting tables from town to town across Europe and US, she met a crypto trader who opened her eyes to how she can invest and make money with blockchain. Nowadays she is a trader and a blogger, writing about new currencies, NFTs, p2e platforms, and DeFi in general.