The ‘digital euro’ is coming. Christine Lagarde, president of the European Central Bank (ECB), recently announced a new deadline of October 2025 to finalise preparations for a digital version of the currency. This is a very bad idea. A regulator-fuelled intervention in the money market of this kind directly threatens the privacy and security of European citizens. Lagarde should delay or cancel the implementation of the digital euro before it is too late.
After Covid-19 the use of physical money has decayed due to regulations which punished its use. They include the increase in tax pressure, the cash limit being reduced from €2,500 to €1,000, and even the availability of ATMs dropping dramatically from 53,000 in 2019 to 39,000 in 2022. These regulatory obstacles have not subsided now the pandemic is over. The consequence in this case is that the process of dematerialisation of money has been accelerated.
Moving away from physical cash is not necessarily a bad thing. However, big shifts like that should take place due to consumer preferences, not top-down diktats from regulators or central banks, who do not always act in citizens’ best interests. Whether intentional or not, Lagarde’s hasty push to launch the digital euro risks putting the state’s agenda in first place, relegating the needs and worries of consumers into second.
One of the main concerns about the digital euro has to do with privacy. In a public consultation conducted by the ECB in 2020, 43% of respondents ranked privacy as the most important aspect of the digital euro (above other features) for maintaining trust in payments in the digital age. However, safeguarding privacy in the digital euro is going to be complicated. An ECB report tells us as much when it candidly declares: “user anonymity is not a desirable feature.” It is no surprise many consider privacy and data protection to be two of the most important design elements of a digital euro.
The ECB has developed the digital euro in its three reports called “progress in the research phase of a digital euro.” The first progress report laid out key provisions such as: that there would be monitoring of digital euro transactions, and that privacy would not be possible (the report places a lot of emphasis on privacy, however, there is no such thing as complete privacy).
The second progress report turned it on its head: instead of the ECB handling everything, it would only handle the issuance and settlement of the digital euro. The private sector would handle everything else, such as handling customer data.
Subsequently, in May 2023, the ECB published its third progress report. At the time, the ECB was having a PR crisis regarding the digital euro. Christine Lagarde had been caught on camera admitting her plans for the digital euro include “a limited amount of control.” She candidly added she is “considering a mechanism where there would be zero control” but “that would be dangerous.” Lagarde believes it is dangerous for Europeans to be free of government ‘control.’ Government initiatives have an undesirable tendency to spiral – if she admits this before the digital euro has launched, how much worse will things get a few years down the line?
This is probably why the third progress report changed programmability to conditional payments. Programmability allows limits on what you can buy, where you can buy it, and when you can buy it using a digital euro.
Moreover, in an article written by Maarten G.A. Daman (Data Protection Officer), we are clearly told the digital euro will not be as private as cash: “The ECB blog explains what future users of the digital euro can expect. Will it be as private as cash? Not quite, but close,” writes Daman.
Finally as the ECB entered the preparation phase, it published yet another report entitled “a stocktake on the digital euro”, a summary report on the research phase and prospects for the next phase. The report states the digital euro will guarantee privacy. What it doesn’t say is that the definition of privacy in the context of the CBDC means not sharing your data with private companies. In other words, if you share your data with the ECB, it remains ‘private’ by this definition.
The report also tells us about a “secure element” the ECB wants installed on our devices. It notes the ECB wants regulations which would allow it to modify the hardware of existing devices; that is, to modify the chips in your phone to make them compatible with the digital euro.
Alarmingly, it says rolling out the digital euro “will ultimately depend on the requirements set out in legislation for equipment manufacturers and electronic communications service providers.” The ECB wants to add a new chip into your phone so it can more easily monitor how you spend your money.
Whatever the ECB’s intentions with the digital euro, we do not have to dig very deep to find myriad reasons to be concerned about privacy. We only need to look at the papers published by the ECB to notice these fundamental problems with the privacy implications of the model. If European citizens want privacy, we are better off keeping our money as far away from the ECB’s meddling as possible.
Jorge Muñoz is a writer and policy fellow with Young Voices Europe. He holds degrees in Law and Business Administration, as well as an MBA. Jorge is also the founder of the social media platform Libertad Individual, which is dedicated to promoting the principles of liberty and has over 300,000 individuals engaging with its content.