- The digital euro is in the “investigation phase,” but it has already raised a number of privacy and utility concerns.
- Users are concerned that governments would gain an unbalanced control over citizens’ money with CBDCs.
- The ECB claims that the digital euro would protect privacy.
A couple of days ago, the European Central Bank (ECB) launched the initial phase of its digital euro project. This phase, which the ECB calls the “investigation phase,” is expected to endure 24 months of testing, during which the team would mainly work on the design and distribution elements of the digital euro.
The announcement explicitly stated that this phase is not an indication that a digital euro will be developed. Instead, the ECB will make its concluding decision once the investigation is over. The bank also pointed out that a digital euro would not replace cash, rather complement it.
The ECB expects the digital euro to be able to “prevent illicit activities” and also avoid disturbing the financial stability. ECB President Christine Lagarde asserted that they have already conducted some experiments and that results were “encouraging.” “It has been nine months since we published our report on a digital euro. In that time, we have carried out further analysis, sought input from citizens and professionals, and conducted some experiments, with encouraging results,” she said.
Digital Euro Raises Concerns Among Europeans
It goes without saying that CBDCs are a tragedy for consumer privacy. CBDCs enable governments to track, monitor, and record all the financial data of their customers. Some Europeans have taken to Twitter to express their concerns regarding such issues.
A pseudonymous user mentioned how CBDCs can give the government head-scratching control over money, saying that CBDCs can expire, can be traced, and can be frozen in a matter of seconds:
welcome to the evil counter twin of programmable money:
Euros with expiration date,
Euros that can only be spent on goods that fit political agendas,
Euros that trace your spending behavior,
Euros that can be frozen and taken at will
"the future of france"
— Bitcoin-Berzerk (@BerzerkBitcoin) July 14, 2021
A major concern regarding all CBDCs is that governments can easily limit their transactions and even ban them. Currently, banks do filter transactions. For example, over the last few days, a couple of UK banks have been banning transactions to Binance. However, with CBDCs, this situation can get much worse.
This is part of great reset agenda. Neo feudalism. Your money will be attached to CBDC and if you don't follow the rules set by elite, you will be cut out of system. Simple example, you don't accept vaccine, you cannot spend your digital euro. It sounds like digital slavery to me
— There is No Spoon (@GoetheJarek) July 14, 2021
CBDCs can even execute negative interest rates, and make them enforceable to all users. Moreover, some even argue that a CBDC would be a regression instead of a progression:
Digitization of money will follow same pattern as music. But instead of supporting the amazing developers and fintech knowledge in Europe, to build Spotify/Bandcamp equivalents on top of Bitcoin, your gonna try and reinvent & sell your proprietary version of MP3 🙄
— BagofAtoms (@FmYams) July 14, 2021
While the ECB stated that the digital euro will be designed to protect privacy, it contradicts the fact that the digital euro aims to “prevent illicit activities.” After all, the ECB wouldn’t be able to stop illegal activities unless they violate user privacy.
It is not impossible for the ECB to reach the right balance to partially keep privacy while preventing illicit activities, though it would be a major challenge. It remains to be seen if the ECB manages to address these issues and convince Europeans to utilize the digital euro.