Tougher Privacy Safeguards Needed for Digital Euro, Says Finance Watch
Consumer lobby group Finance Watch has called for stronger privacy protections for the use of a digital euro online, as concerns over increased surveillance mount among policymakers. The European Central Bank (ECB) is expected to announce this month whether it will proceed with the development of a digital euro, joining other central banks, including the US Federal Reserve and the Bank of England, in keeping up with technological advancements in payments.
The European Commission has proposed a draft law that would provide a legal framework for a digital euro. However, critics are concerned that it may lack the anonymity provided by physical cash and ultimately lead to the phasing out of cash altogether. In response, Finance Watch published a policy paper on Tuesday, stating that a digital euro, if accompanied by robust privacy and data protection measures, could reduce European citizens’ reliance on a handful of dominant payment firms and Big Tech platform operators, thereby preventing further market concentration.
While Finance Watch acknowledges that some concessions may be necessary to prevent money laundering, it argues that the proposed EU law grants greater privacy protection to the offline use of a digital euro stored in a customer’s “wallet”. The lobby group calls for a higher level of privacy and data protection to be applied to small, low-value online transactions as well. It believes that this would strike a balance between privacy concerns and the need to combat illicit activities.
Mairead McGuinness, the EU’s financial services chief, cautioned last month that the draft law should not be rushed and is currently undergoing approval by EU member states and the European Parliament. Meanwhile, the Bank of England has emphasized the importance of engaging in a “national conversation” to address public fears that a digital pound would enable government surveillance.
The debate surrounding the introduction of a digital euro highlights the growing tension between privacy and convenience in the digital era. As central banks around the world explore the potential of digital currencies, finding the right balance between the benefits of innovation and preserving individual privacy rights will be a key challenge for policymakers.