Addressing privacy concerns, Nagel noted that financial institutions and other payment service providers processing digital euro payments “would not be allowed to use personal and transaction-related data for commercial purposes.” He noted though that this restriction would only be lifted if users explicitly granted consent. “They [banks] would, however, have limited access to these data to the extent necessary in order for them to comply with anti-money laundering and counter-terrorism financing regulations.
Offline payments would therefore be limited to low-value transactions.”
In addition to privacy concerns, Nagel also acknowledged that banks “have their share of concerns when it comes to the digital euro,” saying the lenders are afraid that the digital euro “might become an attractive substitute to bank deposits.” “Banks could lose an important source of funding. This could cause structural disintermediation and reduce banks’ ability to provide credit.” Joachim Nagel
He assured that the Eurosystem is aware of these risks and will implement necessary precautions, including setting low maximum amounts for CBDC holdings to ensure that “banks will be able to cope with an additional demand for liquidity.”
Although Nagel admitted that some people “doubt whether we need a digital euro at all,” he emphasized his confidence in the economy digitization, saying that both consumers and retailers “would appreciate the benefits of having a single payment instrument that ticks all the boxes.”
Meanwhile, the United States is taking a cautious approach regarding the launch of a CBDC, with Federal Reserve Chair Jerome Powell indicating that the country is far from making a recommendation or implementing a CBDC.