A potential new digital euro would allow anonymous transactions for small payments in spite of anti-money laundering (AML) norms, a leading member of the European Central Bank (ECB) said.
The suggestion made by ECB Executive Board member Fabio Panetta on Wednesday of giving a special treatment to the central bank digital currency (CBDC) stands in contrast to proposed rules for private cryptocurrencies like bitcoin, where lawmakers are debating a plan to outlaw privacy for even low-value transactions.
Normally, financial transactions are subject to checks called “know your customer,” or KYC – meaning that financial institutions have to check the identity of those involved to ensure funds aren’t being laundered or used to fund crime.
Panetta, the official leading work on the digital euro, today said he was prepared to soften those rules for people using any putative new digital currency issued by the ECB, at least in the case of small payments.
“A greater degree of privacy could be considered for lower-value online and offline payments" made using the digital euro, Panetta told lawmakers on the European Parliament's Economic and Monetary Affairs Committee Wednesday.
"These payments could be subject to simplified AML/CFT checks," he added, referring to EU rules against money laundering and terrorism financing.
The EU has strict rules on protecting personal data, and privacy protections are the number one feature Europeans want in a digital euro, according to a 2021 ECB survey. ECB experts have floated ideas like “anonymity vouchers” that would allow people to shield a limited value of transactions from the authorities.
But more detailed research published today and based on focused discussions with panels of EU citizens put more emphasis on universal acceptance and security checks like iris recognition.
"We have investigated various options to address the trade-off between retaining a high degree of privacy and other important public policy objectives," Panetta said.
But they come in the week that the EU prepares to end the possibility for anonymous crypto payments altogether. The European Parliament is due to vote Thursday on how to extend existing money laundering controls to crypto payments. An existing threshold of EUR 1,000 ($1,100) under which a payer’s details don’t have to be recorded seems likely to be scrapped for virtual assets, as lawmakers say it’s too easy to circumvent the rules by splitting up large payments.
The ECB is currently investigating whether to issue the digital currency. A formal ECB decision to move ahead, as well as draft legislation that could underpin the move, are expected next year.
Read more: The Digital Euro: What We Know So Far
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