Joachim Nagel, president of the German Central Bank (Deutsche Bundesbank), emphasized once again that the Eurosystem cannot trace individual transactions when processing Central Bank Digital Currency (CBDC) payments, ensuring a high degree of privacy due to limited data access.
During a talk at the DZ Bank Capital Markets Conference 2024, Deutsche Bundesbank president Joachim Nagel explained that the Eurosystem wouldn’t be able to trace individuals based on their transactions using central bank digital currencies (CBDCs). Instead, it would only have access to a limited amount of data required for completing its responsibilities, such as settlement procedures.
To alleviate privacy issues, Nagel pointed out that organizations handling digital euro transactions, including financial institutions and payment service providers, would be prohibited from utilizing personal and transaction details for commercial gains. However, he added that this limitation could be waived if users willingly gave permission.
Banks would only be able to view a restricted portion of the data for the purpose of adhering to anti-money laundering and counter-terrorism financing laws. High-value transactions made offline would thus be prohibited. (Joachim Nagel)
Besides raising privacy issues, Nagel acknowledged that banks harbor fears regarding the digital euro. They worry that this digital currency could potentially draw depositors away from traditional bank accounts.
Banks might face the loss of a significant financing method, which could lead to structural disintermediation and limit their capacity to extend loans.
Joachim Nagel
The Eurosystem acknowledges these risks and plans to take appropriate measures, such as limiting the maximum amount of central bank digital currency (CBDC) that banks can hold, to help them manage any increased demand for liquidity.
Despite Nagel’s acknowledgment that some question the necessity of a digital euro, he expressed his strong belief in the value of economic digitization. He pointed out that both consumers and merchants would enjoy the advantages of using a universal digital payment method.
Currently, the United States is adopting a cautious stance towards the creation of a CBDC. Jerome Powell, the Federal Reserve Chair, has stated that the country is yet to make a decision or put one into action. In his testimony before the Senate Banking Committee in early March, Powell reassured the public that there’s no need for immediate worry about a central bank digital currency. He added that such advancements are unlikely to occur anytime soon.
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2024-04-24 12:08