Joachim Nagel, the president of the Deutsche Bundesbank, has underlined the limited data visibility of using central bank digital currency (CBDC) for transactions.

During his speech at the DZ Bank Capital Markets Conference 2024, Nagel restated that the Eurosystem cannot track individuals’ central bank digital currency (CBDC) transactions. He added that user information would be limited and that only vital data needed for Eurosystem functions, such as settlement, would be accessed.

Ensuring Data Privacy Protection

To alleviate privacy concerns, Nagel stated that financial institutions and payment service providers handling digital euro transactions cannot use transaction and personal data for commercial gain. He emphasized that this would not change unless users provided consent.

Nagel added that banks would only access such information to comply with anti-money laundering and counterterrorism financing regulations. He also said low-value transactions would be the main target market for offline payments.

These steps aim to protect user privacy while guaranteeing adherence to legal requirements. Nagel’s comments highlight how crucial it is to balance personal privacy rights and security requirements in the rapidly evolving digital finance landscape.

Concerns over Digital Euro

Speaking of the Eurosystem, Nagel responded to banks’ concerns about the potential impact of a digital Euro on their operations. He acknowledged their concern that the digital Euro would draw attention away from traditional bank deposits.

However, the central banker reassured stakeholders that the Eurosystem understands their concerns and is prepared to take appropriate action. These precautions include imposing low limits on the maximum amount of CBDC that individuals can hold for banks to manage any increased demand for liquidity effectively.

Despite skepticism about the need for a digital euro, Nagel expressed confidence in the economy’s continued digitization. He added that it offers multiple benefits for consumers and businesses, especially a streamlined payment system.

In contrast, the United States is proceeding cautiously with implementing a CBDC. During his recent testimony before the Senate Banking Committee, Federal Reserve Chair Jerome Powell expressed a desire to avoid making hasty decisions. Powell reassured the public that there are no plans to implement it now, stressing that such an initiative is not on the immediate agenda.

Disclaimer

This article is provided for information only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.