Digital Euro: ECB Promises No Interest in User Data

• The European Central Bank (ECB) is researching the potential of a single central bank digital currency (CBDC).
• Representatives from private and public banking institutions discussed their opinions on the digital euro.
• The ECB has identified three use cases for the digital euro, but questions remain about its adoption by customers.

The Digital Euro

The European Central Bank (ECB) is researching the potential of a single central bank digital currency (CBDC). Representatives from private and public banking institutions discussed their opinions on the digital euro in April’s issue of Views magazine. The ECB has identified three use cases for the digital euro, but questions remain about its adoption by customers.

Use Cases

The three use cases prioritized by the ECB are person-to-person payments made between individuals; consumer-to-business payments, including e-commerce and purchases made in a physical shop; and payments to or by the government.

Competition with Private Banks

Private bankers have expressed concerns that central bank digital money could threaten their business model by competing with their collection activity and disrupting their financing capacity. To avoid this, it is suggested that the digital euro should be limited to use as a payment method rather than a store of value. This view was shared by Burkhard Balz, a member of the executive board at Deutsche Bundesbank who also noted that economic incentives are essential to involve intermediaries in distributing the CBDC.

Resistance from Customers?

There is still uncertainty about how customers will react to this new form of central bank money and how widely it will be adopted. Evelien Witlox, program director for the digital euro at the ECB, acknowledged this concern while promising that customer data will not be collected during transactions using CBDCs.

Conclusion

As research continues into using CBDCs as an alternative form of payment, representatives from both private and public banking institutions have voiced their opinion on how best to implement them. Not only must economic incentives be provided for intermediaries involved in distribution, but customer data must also be protected if adoption is to succeed overall.