Digital euro will have highest level of privacy, says CBC official

The digital euro will have the same level of privacy as cash notes, according to Stella Ioannidou, a financial market infrastructures and payments expert at the Central Bank of Cyprus (CBC).

Ioannidou on Monday addressed the most prevalent myths surrounding the digital euro, after feedback was gathered from citizens across the euro area.

One of the main concerns that has been voiced is that “the state will monitor us and control our buying habits.”  

However, Ioannidou stated that this is simply not the case. In fact, she clarified that the digital euro “would offer the highest level of privacy protection, similar to what we have today when we pay with cash”.

She explained that “the way we transact is a private matter”, and assured readers that “the digital euro would not give banks, technology companies, or governments access to our purchasing information”.

To support this, Ioannidou outlined three key privacy features of the digital euro. First, she highlighted that the system would have an offline mode, allowing individuals to make transactions directly between devices without intermediaries.  

“Neither your bank, nor your friend’s bank, nor the Eurosystem would have access to this data,” she said.  

Secondly, Ioannidou mentioned that messages would be encrypted, and personal data would be pseudonymised, meaning that “a random code would replace” personal information to ensure that the Eurosystem wouldn’t have access to users’ identities.  

Finally, she emphasised that central banks like the Europen Central Bank (ECB) serve the public interest and, unlike profit-oriented companies, are not motivated to sell personal data.

Another myth that Ioannidou addressed is the belief that “the digital euro will be limited to certain transactions only and will lose its value within time limits to encourage people to use it quickly.” 

She reassured the public by stating that “the digital euro would be convertible into cash on a one-to-one basis, so any restrictions on its use would not exist”.

In fact, she said, the freedom to choose when and how to use the digital euro remains intact. To clarify further, she pointed out that central banks “do not issue coupons but money,” and that the digital euro would be universally accepted just like physical euros.  

The myth that the digital euro is an indirect means to abolish cash is also widespread, but Ioannidou was quick to dispel this idea.  

“We are maintaining the availability of the safest form of money we have today – namely cash,” she said, noting that the introduction of the digital euro is meant to supplement, not replace, cash.  

In fact, she noted that the European legislator is ensuring that euro banknotes will continue to be issued, and a new design for physical notes is already in the works.

Furthermore, Ioannidou tackled the argument that “we don’t need the digital euro as we can already pay electronically, especially with cards”.

According to Ioannidou, the digital euro would fill a gap in the current payment landscape by offering something that “does not exist today,” particularly in terms of privacy, universal acceptance, and free basic use.  

Importantly, she explained that it would also reduce Europe’s reliance on non-European payment companies, making European payment systems more resilient.  

She cited an example from the recent Paris 2024 Olympics, where only VISA cards were accepted at certain venues.

This, she said, “would not be possible with the digital euro, as it would be mandatory for it to be accepted”.

Additionally, Ioannidou acknowledged that concerns about the digital euro project are to be expected, but she reassured the public that “the Eurosystem has the interests of the 349 million citizens in the euro area at the heart of its work”.

“Transparent information is necessary to set the record straight and to make the digital euro understandable to the general public,” she concluded.