Germany’s central bank and the Massachusetts Institute of Technology (MIT) will join forces to study several aspects of central bank digital currency (CBDC) design, particularly security and privacy.

Bundesbank and MIT Explore CBDC Security

Deutsche Bundesbank joined the CBDC study as part of MIT’s digital currency initiative (DCI). This was announced by Joachim Nagel, President of Deutsche Bundesbank, during his speech to MIT students.

According to him, the joint research will be aimed at developing CBDC security and privacy measures. However, the official’s speech was generally focused on the digital euro. The following were highlighted among the features of the European CBDC that are planned to be implemented:

  • the digital euro will provide the highest possible level of privacy; 
  • participants in the financial system won’t have access to personal information of digital euro users; 
  • users will be provided with the highest possible level of control over their personal data. 

Joachim Nagel emphasized the limited compatibility of bank cards even within the Eurozone, as well as access to consumers’ payment data by payment service providers and third-party services used to process transactions.

The major risk associated with the issuance of the digital euro, according to the official, is the likely disruptive impact of the financial instrument on economic stability and the banking system in times of crisis, as the CBDC is a riskless asset. However, there are plans to set limits on ownership of the digital euro to counter this risk.

No specifics regarding the expected timing of the digital euro launch were voiced. The president of the Deutsche Bundesbank only noted that the project is at the preparatory stage — the finalization of the set of rules for the digital euro and the selection of suppliers for the development of the necessary infrastructure and platform on its basis.

In February 2024, representatives of the EU banking sector expressed concerns that the introduction of the digital euro could provoke an acute general economic banking crisis. Earlier this year, the European Central Bank (ECB) reported on progress in the development of standards and regulatory rules for the European CBDC.

Author: Alex Golovakha
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