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ECB Deploys ‘Anonymous’ Digital Euro As Public Opposes ‘Slave Coins’

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The European Central Bank (ECB) is moving forward with its Central Bank Digital Currency (CBDC) project, although Europeans don’t appear to be too keen on a digital euro.

The ECB has published another working paper on the digital euro, providing a comprehensive technical analysis of a potential European CBDC and its position in the existing financial system.

Released on May 13, the working paper aims to examine issues such as financial intermediation, payment options and privacy in the digital economy, and to provide a large number of related algebra-based conclusions.

The study suggests that a “CBDC with anonymity” is preferable to traditional digital payments like bank deposits, but may be “supplanted” by digital currencies or “payment tokens” issued by tech giants.

“This risk would be particularly palpable if these platforms competed with banks in the financial services market. However, an option for data-sharing capabilities may lead to widespread adoption of CBDC,” the working paper said.

According to the ECB, one of the main problems with cash is that it cannot be used for more efficient online transitions while still maintaining anonymity. In contrast, bank deposits can be used online but do not offer enough anonymity.

Finally, “digital currencies issued by technology platforms allow merchants to hide from banks but allow platforms to stifle competition,” the ECB wrote, adding:

“An independent digital payment instrument — a CBDC — that allows agents to share their payment data with chosen parties can break down any friction. […] Introducing a CBDC with anonymity allows merchants to prevent banks from extracting information from cash flows.”

While the ECB continues to promote a potential digital euro with anonymity features, Europeans are not entirely optimistic about CBDC. According to public feedback from another consultation on the digital euro, the majority of Europeans are against introducing a CBDC in the European Union.

Launched on April 5, the consultation has garnered 14,110 feedback entries as of the writing of this article, many of which oppose the idea of ​​a central bank-controlled digital currency and the associated lack of user privacy. Some online commentators even dubbed a CBDC a “slave coin” and opposed the “digital slavery” that such financial instruments might introduce.

“The digital euro in the sense of the EU reference is neither compatible with the protection of privacy nor with data protection regulations. […] A control system for the small guarantors is needed,” wrote the Austrian Schmidl Andreas.

“I am absolutely against the introduction of a digital euro because I do not want to be dependent on the internet for shopping. I am strictly against the digital euro because it leads to total control and limits our fundamental rights and freedoms,” wrote another anonymous user.

As previously reported by Cointelegraph, the issue of user privacy has emerged as one of the biggest issues surrounding central bank digital currencies. This quickly became a major concern for global regulators and governments as they need to prevent illegal financial activities while maintaining confidentiality.

According to a previous public consultation on the digital euro, published in April 2021, user privacy was seen as the most important feature of a digital euro by both citizens and professionals in the European Union.

Related: ECB presentation shows that no data protection options are available to the proposed digital euro designs

There are a number of other issues associated with a digital euro, including the alleged lack of demand. Jonas Gross, chairman of the Digital Euro Association, told Cointelegraph in April the main goal of the digital euro is still not clear. Last year, regulator Pablo Urbiola of Spanish bank BBVA argued that it was not clear exactly what kind of customer demand the digital euro was meant to meet.

According to the CFO of the European Commission, Mairead McGuinness, the ECB expects a CBDC prototype by the end of 2023.