Two weeks ago, the European Central Bank published its report on the digital Euro, which said it would decide whether to proceed with a project by mid-2021. Now it has launched a public consultation on the topic.
Separately, a Bank for International Settlement (BIS) publication on central bank digital currencies (CBDC) in conjunction with seven central banks was published last week.
We noted that the BIS report floated the issue of how to pay for a CBDC, who might be charged, and in the context of covering costs, whether “allowing access to consumer data is permitted.” In other words, whether it might sell data to cover costs.
These issues have cropped up again in the ECB consultation.
The ECB survey asks participants to rank CBDC feature choices from a long list of nine items. However, some of these ‘features’ would be taken for granted, and hence the real issues could end up being ranked as less important, hidden, or misunderstood.
For example, most people might assume that a digital euro would be easy to use, secure and be usable throughout the euro area. Would anyone use an insecure one? They’d probably also expect it to be available on a smartphone and at payment terminals. Removing these items leaves a more manageable list of five questions.
Two contentious questions
The shorter list throws a spotlight onto three true feature queries and two contentious issues.
The contentious questions:
- I want my payments to remain a private matter
- I want to use a digital euro without having to pay additional costs
Most people might assume payments would be private other than perhaps for anti money laundering (AML) or tax. Especially given the inclusion of the four previously mentioned required features, the privacy question might be taken for granted.
All central banks examining CBDC are considering under what circumstances the government gets to peek at the transactions. After all, physical cash is entirely private.
However, if you’re going to ask the public about privacy, perhaps there’s a need to be more explicit about what you mean. Because sharing data with the government for AML or tax surveillance and sharing your transactions with businesses are two different things. And based on the BIS report, the latter IS also being considered by some central banks.
However, Fabio Panetta, an ECB board member, noted in a speech that “a digital euro would increase privacy in digital payments thanks to the involvement of the central bank, which – unlike private suppliers of payment services – has no commercial interests related to consumer data.”
For the record, apart from the two contentious issues, the true feature queries are:
- I want to be able to pay even when there is no internet or power connection
- I want my transactions to be completed instantaneously
- I want it to take the form of a dedicated physical device
Many central banks have argued you cannot have a CBDC system without it working offline, but it’s still a valid question.
Update: the quote from Fabio Panetta was added.
