On October 18, the European Data Protection Board and the European Data Protection Supervisory Authority issued a joint statement regarding the regulation of the digital euro, aligning it with the European Commission's proposals outlined in July 2023. The regulatory bodies have put forth a series of recommendations aimed at enhancing the standards for personal data protection within the framework of the EU Central Bank Digital Currency (CBDC), or the digital euro.
One key recommendation pertains to the clarification of the proposed verification process for determining the maximum allowable amount of digital euros that can be held in individual accounts. The existing draft grants the European Central Bank (ECB) and national central banks the authority to establish a single access point for each user's data. However, both authorities have stressed the importance of conducting an assessment to evaluate the necessity and proportionality of implementing a single access point. They have emphasized that it is feasible to implement technical measures that would decentralize the storage of these user identifiers, potentially enhancing data privacy.
Additionally, the regulatory bodies have drawn attention to the need for greater predictability within the proposed CBDC fraud detection and prevention mechanisms. They have suggested considering alternative, less intrusive measures that are more aligned with data protection principles.
Furthermore, the authorities have made a "strong recommendation" for the establishment of a "privacy threshold" in online transactions. This threshold, though not specified in terms of a specific amount, would delineate transaction limits below which anti-money laundering and counter-financing of terrorism tracking would not apply to both offline and online small-value transactions. The focus is primarily on daily small transactions, but further details regarding specific limits remain to be defined.
The European Central Bank (ECB) has also announced that the digital euro project has advanced into a "preparatory phase" following a two-year investigation. This preparatory phase is slated to span two years and will primarily concentrate on finalizing the regulatory framework for the digital currency while identifying potential issuers.
