The EU Commission is planning to introduce a digital euro as a new form of official currency to meet the needs of a digitizing economy. The Commission is concerned about the increasing use of private digital means of payment and the potential entry of digital currencies from third countries or stablecoins onto the market. The Commission wants to ensure that the processing of digital euro transactions does not compromise privacy, while still adhering to anti-money laundering regulations. Possible technical solutions include pseudonymization and encryption. However, pseudonymization may not provide complete anonymity and can be removed through big data analyses. The ECB is also skeptical about unrestricted anonymity and is considering “anonymity vouchers” as a solution. Commercial banks fear that the digital euro may lead to the withdrawal of funds from bank deposits. The Commission wants to strike a balance between ensuring widespread use of the digital euro and protecting financial stability and the supply of credit. The leaked document suggests that the digital euro should be accessible to the general public as a broad payment option, including in retail. The Commission wants to reduce fragmentation in the European retail payments market and encourage competition. Credit institutions will be obliged to offer basic digital euro payment services to their customers. Public institutions and payment service providers will also be involved in selling and processing digital euro transactions. The digital euro will not bring any interest and will not be programmable, to differentiate it from cryptocurrencies like Bitcoin. The ECB has already started an investigation into the digital euro, focusing on technology and data protection. The results have shown that it is possible to integrate the digital euro into the existing payment landscape, both online and offline, with different technical concepts. However, providing an offline solution that meets the requirements of the Eurosystem may be challenging with existing technology.
