Digital Euro: We Need Facts, Not Propaganda (Part 4)
Will digital money lead to total surveillance of our society? There is great concern about the loss of privacy. Lobbyists promise us unparalleled security. Yet the digital euro offers a multitude of technological conditions for new interventions and restrictions on our fundamental rights and freedoms. The only question is which interests will be pursued in the political command centres in the years to come. Money is an instrument of power. This is all the more true in the case of a central bank digital currency.
The final part of our mini-series on the digital euro is devoted to the private sphere. The private sphere - as far as business is concerned - has been under pressure for some time. Firstly, on a political level. Let's not forget that cash payments are limited to 10,000 euros throughout Europe. In addition, "gatekeepers" (i.e. shopkeepers, estate agents, banks, etc.) must identify and check the identity of people who occasionally make cash transactions of €3,000 or more.[1]
On the other hand, the economy lures us with benefits in order to obtain information about our purchases. Cash payments must be made as unattractive as possible for customers, because they do not generate valuable data.
Are we being watched?
In principle, digital euros can be issued to the public in the form of accounts, or in the form of tokens. A token is nothing more than an asset, in our case a digital one. The ECB is suggesting that banks may in future create 'wallets' for digital euros, and that these wallets may be funded by reference accounts or cash.[2] There is one important restriction: for reasons of financial stability, however, "ceilings" must be imposed on the use of digital euros as a store of value.
In this mini-series, Denis Beau of the Banque de France represents the lobbyists for a digital euro. Beau said recently in Montpellier, on the subject of concerns about the loss of privacy: "Our aim is not to create a European 'Big Brother'. On the contrary, the digital euro will offer unparalleled privacy in the digital space. The central bank will never be able to identify individuals on the basis of their transactions" [3]
Beau pointed out that below a certain threshold, the offline mechanism for personal payments offered a similar level of privacy to cash. The ECB puts forward similar arguments: the Eurosystem would not be interested in people's private payment data or payment habits. But an important restriction immediately follows. The transmission of data "to third parties" would be necessary to prevent counterfeiting or illegal acts.[4]
This brings us to a crucial point: to make life difficult for money launderers, terrorist financers and tax evaders, we are all prohibited from making cash purchases of more than €10,000. Our anonymity is already no longer guaranteed for a purchase of 3,000 euros or more - even if we don't want to launder money or finance terrorism and pay our taxes properly.
Data storage
The European Data Protection Committee[5] has already criticised the fact that the processing of personal data by the ECB and payment service providers under the proposed mechanism is not clearly defined. A "data protection threshold" is requested for online transactions, below which neither offline nor low-value online transactions would be tracked for the purposes of combating money laundering and terrorist financing.
Article 37 of the Proposal for a Regulation of the European Parliament and of the Council establishing the digital euro[6] sets out the relevant rules: payment service providers must store reload and withdrawal data, including the amount paid, the local storage device identifier for offline payments in digital euros, the date and time of the reload and withdrawal transaction, and the account numbers used for the reload and withdrawal.
For this reason alone, data from the offline payment process may be associated with account data. The banks that provide these accounts must, as "custodians", exercise their duty of care and be able to establish the identity of the account holder.
However, payment service providers must also process the data, in accordance with Article 34, in order to verify the application of the restrictions (ceilings), including checking whether potential or existing users of the digital euro have other accounts for the digital euro with another payment service provider. Annex IV of the Regulation promises a "user alias" in this respect.
We know that any form of identification is possible through the association of data. It therefore goes without saying that the introduction of a digital euro will have repercussions on the fundamental rights to privacy and the protection of personal data.
Of course, the legislator will find many excuses to justify this link between data: to prevent and detect fraud, to combat money laundering and the financing of terrorism, to fulfil obligations relating to taxation and tax evasion, and to manage operational and security risks.
Money is an instrument of power. This is all the more true in the case of a central bank digital currency. Everything will depend on who uses it, how and for what purposes.
This article was first published in Courrier des Stratèges on May 17th, 2024.[1] https://www.consilium.europa.eu/fr/press/press-releases/2024/01/18/anti-money-laundering-council-and...
[2] https://www.ecb.europa.eu/euro/digital_euro/how-it-works/html/index.fr.html
[3] https://www.bis.org/review/r240430a.htm
[4] https://www.ecb.europa.eu/euro/digital_euro/faqs/html/ecb.faq_digital_euro.fr.html
[5] https://www.edpb.europa.eu/our-work-tools/our-documents/edpbedps-joint-opinion/edpb-edps-joint-opini...
[6] https://eur-lex.europa.eu/legal-content/FR/TXT/?uri=CELEX:52023PC0369