Digital Euro "Won't be Private or Secure"

Image © European Central Bank

The ECB's approach to privacy with the digital euro leaves a lot of unanswered questions, says a digital identity specialist.

The ECB on Monday released its second progress report on the digital euro, a project it says "will reclaim the freedom to pay digitally, seamlessly, anytime and anywhere – including when shopping online."

The ECB says the digital euro would go hand in hand with banknotes, providing an all-in-one digital payment option across the euro area.

"The report suggests that the ECB intends for the digital euro to have a “cash-like level of privacy” and that the Eurosystem won’t be able to access individual transaction data," notes Alice Shikova at digital identity platform SPACE ID.

Shikova says the ECB's approach to privacy with the digital euro leaves a lot of unanswered questions.

SPACE ID asks who will safeguard the safeguards and ensure that surveillance powers aren't abused and points out that governments don't have the best record with cybersecurity. It also says it is clear that the Eurosystem will have the power to conduct "emergency overrides" and access the data if certain AML or tax laws are breached.

"The question is, what exactly are these thresholds and how can we be sure that these powers aren’t abused? In short, who will safeguard the safeguards?" asks Shikova.

She adds that the ECB’s recognition of the importance of privacy is commendable, but it is pursuing privacy-enhanced strategies rather than a privacy-first approach – and there’s a huge difference.

"Web3 solutions are privacy-first solutions, meaning that privacy is at the heart of their design rather than an afterthought. That means full privacy, not selective based on whether some system has picked up your transaction as suspicious – which, by the way, can happen with entirely legitimate transfers of as little as €1,000 on some centralised platforms today," says Shikova.

In addition, there’s also the question of cybersecurity.

"We know centralised governmental entities are notoriously lax with their security measures – anyone remembers the SEC Twitter account hack? So, do we want to be trusting all our financial transaction data to a centralised government? For anyone in the crypto community, the answer will be an unequivocal 'no'," says Shikova.