ECB outlines the digital euro’s advantages over private stablecoins

The digital euro would offer better privacy protection than private stablecoins, ECB Executive Board member Fabio Panetta said in an interview with the Financial Times.

According to the official, unlike private firms, central banks have no commercial interest in storing, handling and monetising user data.

Panetta noted that consumers are more comfortable when a public institution is responsible for safeguarding their personal data. He emphasised that the ECB has a full range of tools to ensure security.

«There are many ways we can protect confidential data, ensuring legally required checks to curb illicit activities such as money laundering, financing of terrorism or tax evasion», — added Panetta.

In January 2021, the ECB completed public consultations on the digital euro. Most respondents named data privacy as the most important characteristic of the CBDC.

Panetta regards private stablecoins such as Diem from Facebook as “potential threats” to monetary regulators. In his view, they could alter consumers’ attitudes toward digital tools.

«If people want to make digital payments, and we don’t give them that option, someone else will,» he noted.

The official also said that the ECB has conducted pilot offline payments with the digital euro for small amounts (up to €70-€100). In such transactions, user data is not transmitted beyond the sender’s and recipient’s wallets, and the link between them is established via Bluetooth.

In April 2021, ECB President Christine Lagarde said that the European Union could issue its own CBDC within four years if policymakers approve the project.

Analysts at Morgan Stanley estimated that the digital euro would move around 8% of the EU banking system’s deposit base.

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