The European Commission presented a proposal for a regulation introducing the digital currency euro. It is the so-called CBDC (central bank digital currency). Unfortunately, the content of this regulation is disturbing. Let's start with the fact that reconciling the very idea of ​​"decentralization of payments" and "central bank" (centralized by definition) is absurd.

Not so untraceable transactions?

The real problem is that the system would allegedly "protect privacy". By an assumption, or hand-waving. Despite this, the regulation is implemented by issuing incantations and "waving hands". It is not true that the so-called offline transactions would be the equivalent of cash. Or at least this isn’t guaranteed by the regulation. In other words, this sounds more like a PR ploy to reduce concerns about tracking users' lives and transactions. When we pay in cash, no “trace” is left. No one can "process", analyze, or "read'' such data in the future.

With the "digital euro", payment service providers would log data such as:

  • the amount funded or defunded;
  • the identifier of the local storage device for offline digital euro payment;
  • the date and hour of the funding and defunding transaction;
  • the accounts numbers used for funding and defunding.

That is based on Article 37 of the regulation, and this shall apply for "offline digital euro payment transactions". Specifically, "Payment service providers shall retain data of funding and defunding for storing digital euros on payment instruments", though transaction data is not to be stored. The data is to be made available for the "Financial Intelligence Unit and other competent authorities".

So upon request, the information will be made available to authorities. Possibly, such payment infrastructure may simply be inspected. So it is not a solution on par with cash. But even if someone desired to really create untraceable transactions, this seems to be difficult. Just a few cryptocurrencies offer strong guarantees, including Zcach, Aztec, or Aleo. But these are niches and operate on a relatively small scale.

On June 23, a member of the executive council of the European Central Bank signed an article/speech strongly criticizing cryptocurrencies. It's a smokescreen. At the end of his statement, it is indicated that a solution compatible with the introduction of the "digital euro" is the case. This would allegedly be a solution to the problems of “traditional” digital currencies. It's absurd. Introducing the digital euro, and arguing about "improving" the quality of cryptocurrencies sounds artificial and unconvincing. That's because cryptocurrencies are a niche, and payments in euros - by no means are niche!

I'll spare the details of data protection considerations because they're not actually specified. It's just assumed to work somehow.

What's it for anyway?

What's worse, today we don't know in what technology such a "digital euro" currency would work. This is a key decision and an important element for cybersecurity and privacy risk analysis. There is no such information, but a legal basis for the construction of the system is introduced. There have already been voices from the European Parliament that the risks of introducing a digital currency outweigh the benefits. Smart diagnosis. Determining the pros and cons is difficult, also because few countries have decided to test it in practice. There aren't many basics to learn from. Unless from Nigeria? This African country introduced digital currency payments as an official in 2021. And it turned out that citizens are not interested. They even avoid it, even when there is simply no cash - to save the situation, the Nigerian central bank has introduced cash withdrawal limits of up to 10,000 nairas (a little over PLN 500). Despite this, many people willing to use digital currency do not have it because there is no proper infrastructure. The Nigerian case is therefore a failure study. There are of course other countries exploring this area, such as Bhutan.

Actually, why bother at all?

Presenting “digital currency” as some great novelty is also a big misunderstanding. After all, everyone today can use electronic payments, e.g. via e-banking, smartphone applications, and smartphone payments (like Apple Pay). This is another case when politicians, “inspired” by new trends, want to "do something". With all due respect, drinking cold brew latte and eating vege sushis are not the perspective of the general public. In other words, what real problem is being solved?


I am not saying that the introduction of the digital euro is financial doom for the stability of the monetary system (which is not risk-assessed, anyway, so who knows!). But there is no real justification for the central bank's digital currency