The European Central Bank has released an update on progress on the digital Euro CBDC but concerns are being raised by crypto industry experts.
On June 25, the ECB published an update on its two-year preparation phase for the digital Euro CBDC that ends in October 2025.
The central bank said that privacy and data protection are its top priorities, but there are a number of disturbing features to the currency that would result in the total opposite.
On June 26, crypto entrepreneur and investor Daniel Batten highlighted a few of them.
Central Bank Surveillance
A CBDC is essentially programmable money on a blockchain governed by smart contracts. This gives the bank the ability to control how much of the currency people can hold.
“In order to maintain a resilient financial environment, the ECB would limit the amount of digital euro people could hold in their accounts.”
The end game is to eliminate cash and have all financial transactions online, which can be monitored and traced. The ECB stated that these limits are not intended not to prevent the digital Euro from being a store of value altogether “but rather to moderate its use in this capacity.”
This preserves the role of banks in ensuring the efficient provision of credit to the economy, it added. Batten pointed out that the banks would also be able to surveil people more easily, ‘deplatform’ them if they choose, and freeze their accounts. Earlier this year he said the ECB was among a number of banks working together to undermine crypto and financial freedom.
The CBDC also features “offline functionality” that would offer users a cash-like level of privacy, allowing payments without an internet connection using pre-funded accounts, according to the bank.
Observers pointed out that it would still need to use the central bank’s database to function, thus eliminating any privacy that the bank claims it provides. However, a decision on whether to issue a Euro CBDC will only be made after the European Union legislative process is completed and the preparation phase concludes.
When the preparation phase began in October 2023, fintech entrepreneur Kim Dotcom cautioned about using the digital Euro, stating, “It’s a financial surveillance and control tool. First the digital Euro then digital ID and social scores. If you do or say anything they don’t like your funds will be blocked.”
CBDC Pilots Increasing
Europe, alongside several other countries, is actively aiming to phase out cash and convert to a digital currency controlled by the central bank.
According to the Atlantic Council, only three countries have deployed a CBDC – Nigeria, the Bahamas, and Jamaica.
There are 36 CBDC pilots ongoing, including Europe, China, Russia, Brazil, India, Japan, South Africa, and Australia.