The ECB will now analyse in detail the large number of responses – 8,221 is a record for ECB public consultations – submitted to an online questionnaire.

Great interest in shaping the vision of a digital euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More

The public consultation was launched on 12 October 2020, following the publication of the Eurosystem report on a digital euro. The ECB will publish a comprehensive analysis of the public consultation in the spring, which will serve as an important input for the ECB’s Governing Council when deciding whether to launch a digital euro project.

“The high number of responses to our survey shows the great interest of Europe’s citizens and firms in shaping the vision of a digital euro,” said Fabio Panetta, Member of the ECB’s Executive Board and Chair of the task force on a digital euro. “The opinions of citizens, businesses and all stakeholders are of utmost importance for us as we assess which use cases a digital euro might best serve.”

An Electronic form of Central Bank MoneyA liability of a central bank, including banknotes in circulation and banks’ deposits with the central bank. More, alongside CashMoney in physical form such as banknotes and coins. More

The EurosystemThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More task force, bringing together experts from the ECB and 19 national central banksIn general, the expression refers to the central banks of different countries. More of the euro area, identified possible scenarios that would require the issuance of a digital euro. These scenarios include an increased demand for electronic payments in the euro area that would require a European risk-free digital means of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More, a significant decline in the use of cash as a means of payment in the euro area, the launch of global private means of payment that might raise regulatory concerns and pose risks for financial stability and consumer protection, and a broad take-up of central bank digital currencies issued by other central banks.

A digital euro would be an electronic form of central bank moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More accessible to all citizens and firms – like banknotes, but in a digital form – to make their daily payments in a fast, easy and secure way. It would complement cash, not replace it. The Eurosystem will continue to issue cash in any case. In a September 2020 speech on payments in digital world, ECB President C. Lagarde said “The Eurosystem will continue to ensure that all citizens have access to banknotes at all times. A digital euro, in any event, would be a complement to, not a substitute for cash.” However, the ECB report on a digital euro stresses that a significant decline in the use of cash as a means of payment is one of the scenarios that could trigger the issuance of a digital euro.

Payment Privacy ranks First amongst the requested Features

A digital euro would combine the efficiency of a digital payment instrumentDevice, tool, procedure or system used to make a transaction or settle a debt. More with the safety of central bank money. The protection of privacy would be a key priority, so that the digital euro can help maintain trust in payments in the digital age. An initial analysis of raw data shows that privacy of payments ranked highest among the requested features of a potential digital euro (41% of replies), followed by security (17%) and pan-European reach (10%).

Managing the privacy of Central Bank Digital Currency (CBDC)A digital payment instrument, denominated in the national unit of account, and a direct liability of the central bank, like banknotes. A general purpose CBDC can be used by the public for day-to-day payments like cash. More is frequently raised as a major challenge by many experts and observers and each issuing central bank will need to determine the extent to which the CBDC would provide anonymity. Financial Times Alphaville editor Izabella Kaminska has dubbed this the “privacy paradox” and has stressed that a CBDC will be a trade-off between privacy and compliance with Anti-Money Laundering and Know Your Customer regulations. Charles Kahn, research fellow at the Federal Reserve BankSee Central bank. More of Saint-Louis wrote in a 2018 paperSee Banknote paper. More on Payment Systems and Privacy, “Privacy in payments is desired not just for illegal transactions, but also for protection from malfeasance or negligence by counterparties or by the payments system provider itself. Proposals to abolish cash take inadequate account of these legitimate demands for privacy.”

Maintaining Privacy and Complying with Regulations is a Dichotomy

In a June 2020 staff note on Privacy in CBDC Technology, Bank of Canada has outlined technologically feasible options to ensure privacy in a CBDC.  The note emphasises that “Techniques to achieve cash-like privacy are immature. They have limited deployments, none of which comply with know-your-customer (KYC) and anti–money launderingThe operation of attempting to disguise a set of fraudulently or criminally obtained funds as legal, in operations undeclared to tax authorities, and therefore not subjected to taxation. Money laundering activities are strongly pursued by authorities and in most countries, there are strict rules for credit institutions to cooperate in the fight against money laundering operations, to declare and report any transactions that could be considered suspicious. More (AML) regulations. Their risks include hidden vulnerabilities, a lack of scalability and complicated operations. Maintaining privacy and complying with regulations (the latter which requires disclosure of information) present a dichotomy for a CBDC. This is further complicated by the need for proactive disclosure to prevent fraud.”

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