In its advanced report, the European Central Bank (ECB) broke the long silence on development of the central bank digital currency (CBDC). The ECB stated that in the ongoing development of the CBDC, the bank has focused on strengthening the security of the digital currency.
The bank confirmed the integration of advanced tools such as pseudonymization, hashing function, and encryption features to improve the privacy of the digital Euro.
ECB Enhance CBDC Security
Enhancing the CBDC security features aims to prevent government surveillance of individual transactions. The bank explains that integrating additional security features aims to protect personal financial privacy.
The ECB mandates that the payment service provider maintain adequate security standards to protect the consumer’s rights. The bank instructed payment providers to obtain consent before commercializing individual financial data.
The new requirement aims to restore financial integrity and transparency when dealing with personal data. Furthermore, the ECB confirmed that the bank has integrated the offline features of CBDC.
Guided by the four principles of CBDC, which include privacy, transferability, security, and accessibility, the ECB confirmed that the digital Euro will support offline transactions without third-party involvement.
Benefits of CBDC
The development will enable users to seamlessly complete transactions on their digital devices, such as smartphones. The ECB will allow the CBDC offline transaction on smart cards in the coming days.
The bank explained that smart cards powered with batteries or dependent bridging relays can synchronize transactions on CBDC.
The banks stated that integrating the CBDC offline feature aims to improve the accessibility of digital Euro to individuals with no internet connection. The ECB aims to design the digital Euro to boost the accessibility of financial tools to the unbanked community.
Having faced criticism of CBDC development, the ECB took decisive action to integrate technical features of the digital Euro. Also, the ECB has remained at the forefront of providing comprehensive regulation for the digital Euro. The bank embraced a consultation-based approach to develop precise regulations for CBDC.
Policy Makers Oppose the Development of CBDC
In the recently completed public consultation, the European authority gathers feedback from key industry players, including service providers, infrastructure developers, and the general public, concerning CBDC regulation.
According to report, the regulators intend to develop a Rulebook Development Group for the digital Euro this year. The CBDC rulebook will outline the rules and technical features for issuing the digital Euro.
The Rulebook will proceed with further development to address privacy and security concerns facing the CBDC. Despite the significant move made by the ECB, global legislators have challenged the decision to develop the CBDC.
Led by legislators in the United States, the CBDC is profiled as the only platform that allows the government to spy on individual spending habits. Despite the benefits of CBDC, some lawmakers have been campaigning against implementing the digital dollar.
Industry Players Express Concerns on CBDC Privacy
Earlier this month, at the Oslo Freedom Forum, the attendees complained that the CBDC would allow the government to exercise excess power. The attendees regretted that CBDC was still a new concept to many.
At the Oslo event, the legislators revisited the risks related to the development of the CBDC. In particular, the attendees expressed concerns about the privacy and security of the CBDC. The predictions made during the Oslo event mirror a survey made by Trezor in 2023.
The survey depicts that 73% of the respondents were concerned about the privacy of CBDC. The respondents were worried that implementing the CBDC will impact government surveillance on consumer spending habits.
Similarly, market critics believe that the CBDC risks outweigh its benefits. Elsewhere, the former US president vowed not to support the development of CBDC if reelected in the upcoming general election.
Trump claimed that the development of CDBC would grant the government power to monitor individual financial behaviors. Trump’s anti-CBDC campaign support echoes the CBDC Anti Surveillance developed by the US legislators.
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