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Germany’s Central Bank Assures Limited Data Visibility for CBDC Payments

In a recent address at the DZ Bank Capital Markets Conference 2024, Deutsche Bundesbank president Joachim Nagel reiterated the Eurosystem’s stance on central bank digital currencies (CBDCs), emphasizing the minimal data visibility and privacy protections associated with CBDC payments.

Nagel clarified that the Eurosystem would not possess the capability to identify individuals based on their CBDC transactions, as it would only have access to a minimal set of data required for settlement purposes. He underscored that financial institutions and payment service providers handling digital euro transactions would be prohibited from using personal or transaction data for commercial purposes without explicit user consent.

Furthermore, Nagel assured that banks would have limited access to transaction data solely for compliance with anti-money laundering and counter-terrorism financing regulations, with offline payments restricted to low-value transactions.

Acknowledging concerns from the banking sector regarding potential competition from the digital euro, Nagel assured that measures would be in place to mitigate risks of structural disintermediation and liquidity strain on banks. These precautions include setting low maximum limits for CBDC holdings to ensure banks can manage additional liquidity demands.

Despite skepticism from some quarters about the necessity of a digital euro, Nagel expressed confidence in the benefits of digitization for both consumers and retailers. He highlighted the convenience and efficiency of having a unified payment instrument that meets diverse needs.

Meanwhile, in contrast to Germany’s proactive stance on CBDCs, the United States is adopting a cautious approach, as indicated by Federal Reserve Chair Jerome Powell. Powell emphasized during a recent Senate Banking Committee testimony that there is no immediate need for concern regarding a U.S. CBDC, emphasizing that such developments are not imminent in the foreseeable future.

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