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In a collaborative move to regulate the future of digital currencies within the European Union, the European Data Protection Board and the European Data Protection Supervisor have issued a joint statement. Published on Oct. 18, the statement outlines recommendations to bolster personal data protection standards in the European Union’s proposed central bank digital currency (CBDC), commonly referred to as the digital euro. One crucial issue discussed is the proposed verification procedure that limits the amount of digital euro held in individual accounts. Under the current draft, the European Central Bank (ECB) and the national central banks would have a single access point to each user’s data. The regulators, however, call for a reevaluation of this approach. They argue that establishing a solitary data access point might be excessive. Besides, they suggest that employing decentralized storage methods for these identifiers is a feasible alternative, an approach that would enhance the privacy of digital euro users. Unveiling the shortcomings in fraud detection Additionally, the authorities find the proposed fraud detection and prevention mechanisms of the CBDC somewhat lacking in foreseeability. They advocate for a more nuanced approach, recommending “less intrusive measures” from a data protection viewpoint. Moreover, the regulators strongly recommend the establishment of a “privacy threshold” for online transactions. This threshold would mean that offline and online low-value transactions are not subject to tracking for Anti-Money Laundering and combating the financing of terrorism purposes. While they did not specify an exact limit, the authorities referred to covering “low-value daily transactions.” The recent statement comes in the wake of the ECB’s announcement of entering the “preparation phase” for the digital euro project, following a two-year investigation. This phase is slated to last another two years and aims to finalize rules for the digital currency while also selecting possible issuers. Hence, the recommendations…

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Filed under: News - @ October 21, 2023 2:22 am