The ECB has published another working paper on the digital euro, providing an extensive technical analysis of a potential European CBDC and its position in today’s financial system.
Published on May 13, the working document aims to study issues such as financial intermediation, payment options and privacy in the digital economy, providing a large number of conclusions based on algebra.
The study suggests that an “anonymous CBDC” is preferable to traditional digital payments such as bank deposits, but “may be supplanted” by digital currencies or “payment tokens” issued by tech giants.
“This risk would be especially tangible if such platforms compete with banks in the financial services market. However, the possibility of data sharing may lead to widespread adoption of CBDCs,” the working paper reads.
According to the ECB, one of the main problems with cash is that it cannot be used for more efficient online transitions while maintaining anonymity. Instead, bank deposits can be used online, but they do not provide enough anonymity.
The European Central Bank (ECB) continues to push its central bank digital currency (CBDC) project despite the fact that Europeans apparently do not welcome a digital euro.
Lastly, digital currencies issued by tech platforms “allow traders to hide from banks, but allow platforms to stifle competition,” the ECB wrote, adding:
“An independent digital payment instrument – a CBDC – that allows agents to share their payment details with selected parties can overcome all frictions […] The introduction of an anonymized CBDC allows traders to prevent banks from extracting information from payment flows.”
While the ECB continues to promote a possible digital euro with anonymity features, Europeans are not very optimistic about any CBDC. According to public comments in another consultation on the digital euro, the majority of Europeans are against the adoption of a CBDC in the European Union.
The query, launched on April 5, has amassed 14,110 responses at the time of writing, with many opposing the very idea of a central bank-controlled digital currency and the lack of user privacy that comes with it.. Some online commentators even referred to a CBDC as a “slavecoin”, objecting to the “digital slavery” these financial instruments could introduce.
Why don’t you read citizens comments?
100% of the citizens are against a CBDC. It’s a mass surveillance panopticon nightmare. Programmable expiration. Negative interest rates. Freedom killer.https://t.co/leJJ64UMn9
Why don’t you read the comments of the citizens?
100% of citizens are against a CBDC. It’s a panoptic nightmare of mass surveillance. Programmable expiration. Negative interest rates. Freedom killer.
“The digital euro within the meaning of the EU reference is not compatible with either privacy protection or data protection regulations. […] A control system for small guarantors is needed,” wrote Austrian citizen Andreas Schmidl.
“I am totally against the introduction of a digital euro because I don’t want to depend on the internet when I buy something. I absolutely reject the digital euro, because it leads to total control and restricts our fundamental rights and freedoms,” another anonymous user wrote.
As Cointelegraph already reported, the issue of user privacy has emerged as one of the biggest issues associated with central bank digital currencies. This quickly became a big problem for global regulators and governments as they need to prevent illicit financial activity while preserving confidentiality.
According to a previous public consultation on the digital euro published in April 2021, user privacy was considered the most important feature of a digital euro by both citizens and professionals in the European Union.
There are other problems associated with a digital euro, such as the supposed lack of demand. Jonas Gross, president of the Digital Euro Association, told Cointelegraph in April that the main purpose of the digital euro is still unclear. Last year, Pablo Urbiola, director of the Spanish bank BBVA, said that it was not clear what kind of customer demand the digital euro should satisfy.
According to the European Commission’s chief finance officer, Mairead McGuinness, the ECB is still expecting a CBDC prototype by the end of 2023.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.