“Excessive Centralization” of Digital Euro is the Target of EU Privacy Watchdog

The European Union’s data privacy watchdog warned in a statement on Wednesday that there should be no “excessive centralization” of the European Central Bank in plans for a digital euro. The European Central Bank (ECB) is scheduled to make a decision later on Wednesday about the implementation of its plans for a central bank digital currency (CBDC), which has sparked serious worries about the possibility of 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.”
To prevent assets from leaving the traditional banking system, the ECB wants to restrict the amount of CBDC that a person may own. However, Nicolaidou stated that she would rather to see more decentralized storage of the data required to enforce that. Nicolaidou suggested that there should be more transparency regarding the functioning of a fraud prevention mechanism as well as a “privacy threshold” below which no transaction is traced for anti-money laundering purposes.
The General Data Protection Regulation (GDPR), the severe privacy law of the EU, is enforced by the EDPB, and parliamentarians who are already worried about privacy consequences are sure to take note of the board’s views.
“Protecting the privacy of citizens as we work towards a possible digital euro remains a top priority”financial services commissioner Mairead McGuiness responded to the privacy watchdog’s viewpoint in a post on X on behalf of the European Commission, which in June proposed regulations to support the central bank digital currency.
Following significant criticism from members of the European Parliament regarding the CBDC’s overall goal and privacy controls, McGuinness has previously stated that she is willing to take her time reviewing the new law.