The digital euro will protect consumer privacy, the ECB Executive Director promises

The introduction of the digital euro will boost consumer privacy and protect the eurozone from the “threat” of competing cryptocurrencies, which could undermine the bloc’s monetary sovereignty, according to the central banker who oversees its development.

Fabio Panetta, a member of the European Central Bank’s executive council, told the Financial Times that one of the main goals of the program was to combat the spread of digital coins created by companies in other countries.

“If the central bank is involved in digital payments, it will better protect privacy. “Because we are not like private companies,” he said. “We have no commercial interest in storing, managing or even abusing user data.”

“Of course, there is a potential threat that could come from other digital payment providers. If people want to pay digitally, we do not offer them a digital payment method, someone [else] He would do that. “

He contrasted the digital euro, an electronic cash version of the central bank, with “volatile coins” such as Diem and Facebook. planned digital currency which will allow users to send money as easily as text messages.

The last of the ECB consultation found in digital euros that this is the biggest concern of people break their privacyBut Panetta said the central bank had tested ways to separate people’s identities from their payment data. “Payment will be made, but no one in the payment chain can access all the information,” he said.

The Central Bank also tested “online payments for small amounts, in which no data is registered outside the payer-payer wallet,” he said. Transfers of up to € 70 or € 100 can be made between devices via Bluetooth.

“For very small amounts of money, we could make really anonymous payments, but in general, privacy and secrecy are different from anonymity,” Panetta said, adding that most transactions will require some checks to avoid money laundering, terrorist financing or tax evasion. to avoid

“The payment can be restructured [after the event] “If the police want to assess whether any illegal action has taken place,” he said.

Nearly two-thirds of the world’s central banks are doing practical work on whether or not to launch digital currencies, according to Bank of International Settlements,

But commercial banks are worried about that digital currencies of the central bank can erode their deposits, especially in times of crisis. Morgan Stanley estimates that 837 billion euros, or 8% of eurozone bank deposits, could be converted to digital euros.

It can also raise cash, some critics claim. More than half of German households surveyed by the Bundesbank recently expressed skepticism about the digital euro, and frequent cash users are more skeptical.

Panetta said the digital euro would lead to a “fundamental change in the payment system, the financial system and society in general”, for example, by being “programmable” by allowing automated payments, such as tolls or in the cinema. ,

But he said the ECB was determined to ensure that the digital euro did not disrupt the commercial banking system, replace cash, boost innovation or become a shadow currency in small countries.

To achieve this, it is planned to either limit the amount that everyone can keep by 3,000 euros each, or set a “decentralized salary” above that threshold, Panetta said.

The Governing Council of the ECB will meet next month to decide whether push forward In preparation, et Panetta said it could be ready for use in about five years.

He said the central bank would complete its new round of control over suppliers of private digital currencies and cryptocurrencies by the end of this year.

Chart showing the average amount of cash in the wallet at the beginning of the day, by country

Crypt assets such as bitcoin are “very dangerous animals” that are “mainly used for criminal activities” and consume “enormous energy,” Panetta warned.

So-called stable coins, such as Diem, are safer because they are backed by fiat currency reserves, but Panetta said the potential volatility of those reserves “created the typical instability of those coins, so they are still volatile.” : coins. “

“The regulation and control of crypto assets is difficult,” because there is no responsible legal entity, “he said. “It is decentralized. They could be in China. They could be in Switzerland or South America. “But as long as the intermediaries are involved in the supply of those crypto assets, then we would have regulation: control.”

The digital euro should be available to a limited number of tourists visiting Europe, Panetta said, but the ECB “must be very careful about the entry of foreign users” up to that point. ”

Major central banks are negotiating to ensure the “interoperability” of their digital currencies, Panetta said, as it would help “make cross-border payments more efficient and much cheaper.”

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