The European Central Bank (ECB) intends to provide digital euro users with the highest possible level of privacy. The Eurosystem won’t be able to directly identify the senders and recipients of CBDC payments.
European Central Bank Executive Board member Piero Cipollone said that the architecture of the future central bank digital currency (CBDC) won’t allow the Eurosystem to link specific users to their transactions. According to Cipollone, data protection measures will apply to both online and offline digital euro payments.
For offline transactions, payments will take place directly between the payer and the recipient. Data on these payments will be available only to the parties involved. As a result, the Eurosystem, which comprises the ECB and the national central banks of eurozone countries, won’t have access to information that could identify users.
Online payments will follow a different model. Banks processing the transaction will be able to identify the sender and recipient, including for compliance with anti-money laundering requirements. The Eurosystem itself, however, won’t be able to determine the identities of the parties to the payment.
Cipollone stressed that the digital euro will offer a different level of privacy protection from traditional bank transfers, where transaction data is available to participants in the financial infrastructure. According to him, the CBDC model under development is designed to provide a higher level of privacy.
Cipollone also confirmed that the digital euro isn’t intended to replace cash. It’s expected to serve as an additional form of money, particularly for online purchases and other transactions where banknotes and coins can’t be used.
The ECB plans to be technically ready for a potential digital euro launch in 2029 and selected payment service providers to participate in the CBDC testing program. Meanwhile, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) approved requirements for the future digital euro covering privacy, financial stability, and accessibility.
