The digital euro is being designed to provide a high level of privacy while complementing cash rather than replacing it, European Central Bank Executive Board member Piero Cipollone said in an interview published on 24 August.
Cipollone explained that the digital euro would support both online and offline payments. Offline transactions would take place directly between users, with transaction details available only to the payer and payee. For online payments, the Eurosystem would not be able to identify individuals making or receiving digital euro payments.
Only the banks involved in transactions would be able to identify customers, including where required for anti-money laundering purposes. Cipollone said the digital euro is designed to provide greater privacy protection than conventional bank transfers, while offering the highest level of privacy currently possible with available technology.
Last month the European Parliament approved the Regulation for the digital euro, which could be issued in 2029. However, concerns have been raised about the transaction-related data that the digital euro could generate compared with cash. Will the ECB be able to monitor payment habits and track how each citizen uses the digital euro?
I think it’s important to clarify three points about the digital euro. First, it will not replace cash but will complement it, for example when conducting transactions where cash can’t be used, such as online purchases. The ECB has actually just launched a public consultation on the design of the new euro banknotes, and it wouldn’t make any sense to do this if it were planning to get rid of cash. Second, the digital euro is designed to function offline, and in that case, transactions will take place directly between individuals and the related details will only be available to the payer and the payee.
What about the online functionality of the digital euro?
This brings me to the third clarification that it’s important to make: the Eurosystem would not be able to identify the users making or receiving payments. Only the banks involved in the transaction would be able to do so, including for anti-money laundering purposes.
Just as with any other bank transfer?
No. At present, in the case of a bank transfer, all the transaction details are known to the parties involved in the transaction. The digital euro would guarantee greater protection for privacy. In practice, whether used online or offline, the Eurosystem would not be able to directly link specific individuals to digital euro transactions. The digital euro guarantees the maximum level of privacy that current technology can offer.
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