European Central Bank Doesn’t Need Our Data

European Central Bank Doesn’t Need Our Data

• The European Central Bank has put out a statement saying that the digital euro will prioritize the privacy of users.
• A member of the executive board has slammed private firms that issue stablecoins for commercializing the data of users.
• Pilot testing has been conducted successfully to test the practical nature of the digital euro regarding privacy issues.
• Globally, Central Bank Digital Currencies (CBDCs) are picking up steam; the digital yuan is blazing the trail for countries around the world.

The European Central Bank (ECB) has placated public fears over privacy issues with the digital euro. Executive member, Fabio Panetta stated in a recent interview that in terms of privacy afforded to users, the digital euro offers a higher level of privacy than privately issued stablecoins.

This comes in the wake of frenetic attempts by Central Banks to create digital versions of their currencies to compete with cryptocurrencies.

Digital Euro More Private Than Stable Coins

In an interview with the Financial Times, Fabio Panetta, an executive member of the European Central Bank, postulated a strong argument in favour of the digital euro against privately issued stablecoins . Panetta stated that the superior privacy the digital euro will offer to users is incomparable with stablecoins issued by private firms.

The banker took a swipe at the firms behind stablecoins, accusing them of commercializing the data of their users. Panetta argued that since the firms are primarily driven by profit, it serves their interest to commercialize user data.

Speaking with Financial Times, he said that the European Central Bank has “no commercial interest in storing, managing, or monetizing the data of users.” His statement is founded on the conclusion of pilot testing of offline payments, in which “no data was recorded outside the wallets of the payer and the payee.”

The bank official further added that if the ECB wades into digital payments, it will ultimately improve privacy throughout the entire ecosystem.

The Reason for Increased Privacy

In order to develop a digital euro that is acceptable for users, the European Central Bank carried out a public consultation to create a solid blueprint. The public consultation took the form of an online survey which saw 8,221 participants drawn from the citizenry, firms, and other associations.

Launched on October 12, 2020, the survey captured the preferences of participants with privacy concerns topping the list. From the survey, 41% of replies wanted privacy as the priority while 17% chose security and 10% wanted a pan-European reach.

Upon the conclusion of the public consultation, Panetta informed the head of the Committee on Economic and Monetary Affairs (ECON) that the “protection of privacy” was required to maintain trust.

On the Flipside

• According to analysts, a digital euro will interfere with the operational framework of the ECB.
• With negative interest rates, the digital euro may be an additional tax on users by the central bank.

Privately Issued Stablecoins

In recent years, stablecoins have increased in terms of popularity largely as a result of the volatile nature of cryptocurrencies. They achieve their stability by pegging their value to cryptocurrencies, fiat, or exchange-traded commodities.

The most popular among stablecoins is Tether with an impressive market cap of over $62 billion. Others include USD Coin and Binance USD with market capitalizations of $24.44 billion and $9.85 billion.

Given their growth the combined market capitalization of stablecoins currently sits at a staggering $111,531,362,941; it will be interesting to see how CBDCs will compete with these privately issued stablecoins.

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