---

‘Cash-like’ privacy for digital euro – ECB

The European Central Bank (ECB) says that it has agreed on the technical features needed to guarantee that online digital-euro transactions will provide “even higher privacy standards” than current digital-payment systems.

The bank also signalled plans to enable digital-euro users to pay without an internet connection after pre-funding their digital-euro account through the internet or an ATM.

The ECB yesterday (24 June) published a progress report on preparations for the introduction of a digital euro.

Last year, the European Commission put forward a package of legislation setting out the legal framework and essential elements of a digital euro, which would enable the ECB to introduce such a currency if and when it decided to do so.

‘State-of-the-art' measures

The ECB progress report said that the design of the digital euro included an offline functionality that would offer users “a cash-like level of privacy” for payments in physical shops and between individuals.

“When paying offline, personal transaction details would only be known to the payer and the payee, and would not be shared with payment-service providers, the euro-system, or any providers of supporting services,” the bank stated.

The ECB added that “state-of-the-art" measures – including pseudonymisation, hashing, and data encryption, would ensure that it would not be able to directly link digital-euro transactions to specific users.

In line with current practice, it said, payment-service providers would have access only to personal data needed to ensure compliance with EU law, such as anti-money-laundering regulations.

Technical tools

On offline payments, the report outlined plans for payments to take place directly between offline devices, such as mobile devices or payment cards belonging to the users involved in the transaction, without having to rely on third parties.

“The ECB has been investigating the technical tools already available on the market that could allow the settlement of offline digital-euro transactions directly in end-users’ devices,” it stated.

It is also investigating the potential use of battery-powered smart cards or non-powered smart cards that use a bridge device to communicate.

‘Democratic debate’

The report said that individuals would be limited in the amount of digital euro they could hold.

“The digital-euro preparation phase is progressing well, and we support the ongoing democratic debate on the legal framework for the digital euro,” said ECB executive board member Piero Cipollone, who chairs a task force on the issue.

The ECB has stressed that its Governing Council will decide on the possible introduction of a digital euro only when the relevant legislation has been adopted.