ECB Pushes for Digital Euro Amid Privacy Concerns and Banking Risks

According to Cointelegraph, the European Central Bank (ECB) is intensifying efforts to introduce a digital euro, facing resistance from European Union lawmakers over privacy issues and potential impacts on commercial banks. ECB board member Piero Cipollone addressed a parliamentary economic committee, emphasizing that a digital euro would ensure all Europeans have access to a universally accepted digital payment method, even during major disruptions. However, some parliamentarians expressed concerns about the digital currency's ability to protect user privacy and the possibility that central bank-backed accounts could undermine the private banking sector. The legislation for the central bank digital currency (CBDC) has been under consideration by the European Parliament since 2023, experiencing delays due to political concerns and the 2024 elections. Cipollone highlighted that the core of the EU's digital payment systems relies on non-EU providers, which could limit the bloc's ability to respond swiftly and independently in crises. He proposed the digital euro as a contingency plan for cyberattacks or network outages, noting similar U.S. efforts to promote dollar-backed stablecoins. Cipollone assured that a digital euro would complement physical cash, which remains crucial for resilience and inclusion, while digital payments have become essential to daily life. Despite these assurances, lawmakers voiced worries about privacy and the risk that EU citizens might prefer banking with the ECB over commercial banks, perceiving it as a safer option. Cipollone emphasized that the central bank would not have access to information about the payer and payee, and an offline solution for the digital currency would preserve privacy akin to cash. Pierre Pimpie, from the right-wing Eurosceptic Patriots for Europe group, warned that private bank accounts could be depleted due to a digital euro and criticized the ECB's control over setting a cap on user accounts, which he argued could be increased during a crisis. Cipollone responded that the cap would be determined through rigorous analysis and suggested that in a crisis, corporations and wealthy individuals might quickly turn to stablecoins in other currencies, making the digital euro a lesser concern. Looking ahead, Cipollone stated that the ECB anticipates digital euro legislation to be enacted by the second quarter of 2026. Approval from three EU institutions—the parliament, the European Commission, and the European Council—is required, with discussions potentially taking months. Once the law is passed, possibly by mid-2026, the ECB will need to develop and test the digital currency's infrastructure, a process that could take up to three years, aiming for a potential launch by 2029 if no further delays occur.