By Ekin Genç
European Central Bank (ECB) executive board member Fabio Panetta believes a digital euro would preserve privacy better than a stablecoin issued by a large tech company.
“If the central bank gets involved in digital payments, privacy is going to be better protected […] because we are not like private companies,” he told the Financial Times in an interview published today. “We have no commercial interest in storing, managing or monetising the data of users.”
Last month, Facebook-backed Diem Association said a pilot version of its stablecoin—a private digital currency pegged 1:1 to a fiat currency—is on the way. Panetta described Diem, formerly Libra, as an “unstable coin,” according to the FT.
By contrast, the ECB’s digital euro would be a central bank digital currency (CBDC). It’s still a tentative plan; according to ECB president Christine Lagarde, it could take at least four years. Working out how to design the coin would take two years alone, said Panetta.
The interview comes two weeks after the ECB advised governments to pay attention to CBDCs.
In a June 2 report, the ECB said that governments that shy away from CBDCs risk exposing their financial systems and monetary autonomy to “foreign tech giants potentially offering artificial currencies in the future.” The report didn’t mention Diem.
European Central Bank Warns Countries that Fail to Launch Their Own Digital Currency
Panetta did not explain how a digital euro would protect privacy other than suggesting that the ECB wouldn’t be as hungry for consumer data as a private company. “The payment will go through, but nobody in the payment chain would have access to all the information,” he said.
Unlike cryptocurrencies, CBDCs generally are not decentralized. In April, the ECB surveyed the public about its CBDC plans and found that half of the respondents think blockchain could deal with counterfeits and resolve technical glitches.