Digital Euro: EU Commission plans pseudonymization to avoid transparency

The EU Commission is planning to introduce the digital euro to meet the requirements of an increasingly digitalized economy. According to a draft legal framework expected to be presented on June 28, it is necessary to introduce a new form of official currency as legal tender. The commission sees a need to maintain a balance between central bank money and private digital payment instruments as payments are increasingly made online.

Pseudonymization as a privacy measure

To protect user privacy, the Commission plans to design digital euro transactions in such a way that neither the European Central Bank (ECB) nor national central banks can attribute data to an identified or identifiable digital euro user. Technical solutions such as pseudonymization or encryption could be used for this purpose. However, EU anti-money laundering rules must also be complied with, which poses a challenge and raises privacy concerns.

Implications for commercial banks

The introduction of the digital euro could lead to a shift of funds from bank deposits to the more secure digital euro accounts backed by the ECB. Therefore, the Commission plans to develop tools to restrict the use of the digital euro as a store of value. However, this measure could require the processing of personal data to enforce a holding limit across different digital wallets.

Widespread use and integration into the existing payments landscape

The commission plans to make the digital euro available not only to banks but also to the general public. It wants to require all credit institutions that offer payment account services to provide basic digital euro payment services. Public institutions could also distribute the digital euro. The ECB has already conducted tests showing that it is possible to smoothly integrate a digital euro into the existing payments landscape. These far-reaching implications for the financial landscape and data protection show that it will be crucial how the EU Commission tackles the challenges of data protection and financial stability.