EU Privacy Watchdog Takes Aim at ‘Excessive Centralization’ of Digital Euro

EU plans for a digital euro need to avoid “excessive centralization” by the European Central Bank, the bloc’s data privacy watchdog said in a statement issued on Wednesday.

The ECB is due to decide later on Wednesday whether to press ahead with its plans for a central bank digital currency (CBDC), which has raised significant concerns over the potential for state control.

“A high standard of privacy and data protection is instrumental in gaining citizens’ trust in this new digital currency,” the European Data Protection Board’s Deputy Chair Irene Loizidou Nicolaidou said in a statement, saying she wanted to “ensure that data protection is embedded early on in the design phase of the digital euro when used both online and offline.”

While the ECB wants to limit how much CBDC an individual can hold, to avoid assets fleeing the conventional banking system, Nicolaidou said she wants to see more decentralized storage of the information needed to enforce that.

There should also be a “privacy threshold” below which no transaction is traced for anti-money laundering purposes and greater clarity over how a fraud prevention mechanism will work, Nicolaidou said.

The EDPB is responsible for policing the bloc’s strict privacy law, the General Data Protection Regulation (GDPR), and its opinion is likely to be influential with lawmakers already concerned about privacy implications.

“Protecting the privacy of citizens as we work towards a possible digital euro remains a top priority” for the European Commission, which in June proposed laws to underpin the central bank digital currency, financial services commissioner Mairead McGuiness in a post on X in response to the privacy watchdog’s view.

Thank you to the members of the EU data protection authorities @EU_EDPB & @EU_EDPS for their opinion on establishing a possible digital euro.

Protecting the privacy of citizens as we work towards a possible #DigitalEuro remains a top priority for the @EU_Commission. https://t.co/YiNZVgQfRV

— Mairead McGuinness (@McGuinnessEU) October 18, 2023

McGuinness has previously said she’s willing to take her time over the new law after members of the European Parliament voiced considerable skepticism over the CBDC’s privacy controls and overall purpose.