The Council of the European Union has officially endorsed the ECB's design for a digital euro, implementing both online and offline versions with a focus on protecting user privacy.
The Council of the European Union has published the European Central Bank's official position on a digital euro , confirming its agreement with the ECB on the parallel deployment of online and offline versions of the digital currency. The document , published on Friday, marks a significant step forward in the eurozone's digital currency project, with a design that emphasizes the protection of user privacy.
ECB President Christine Lagarde said the next responsibility lies with EU lawmakers, including the European Council and the European Parliament, to assess the adequacy of the European Commission's proposal and to translate it into formal legislation or implement the necessary amendments.
A key feature of the digital euro's design is its offline version, built with cash-like characteristics to prevent observers from linking multiple activities to the same user. This mechanism ensures that transaction data never leaves the direct participants, creating the highest possible layer of privacy protection.
Technical challenges and security limitations
The offline digital euro system is designed to allow authorized devices to transfer central bank-signed tokens in face-to-face transactions. However, the requirement for physical proximity poses significant security challenges. A relay attack, in which an attacker places intermediary devices near the sending and receiving devices to bridge NFC signals over the internet, is considered by the European Data Protection Council to be very difficult to completely prevent.
In its expert analysis, the European Data Protection Council acknowledged that existing countermeasures are very limited and concluded that physical proximity cannot be considered a reliably enforceable attribute in digital currencies. This makes it difficult to control non-proximity-based online usage by advanced users.
To ensure security, the offline digital euro and the private keys managing it will be stored within the secure component of certified devices, including mobile devices and smart cards. This security architecture aims to balance the goal of protecting privacy with the requirement to ensure the integrity of the payment system.
Although designed with the goal of providing a high degree of privacy, the digital euro cannot achieve the same level of anonymity as traditional cash. Technical limitations and requirements of the anti-money laundering legal framework necessitate certain oversight mechanisms, creating a fundamental difference between this digital currency and physical cash.
With approval from the EU Council, the digital euro project has passed a significant milestone in its development roadmap. The next step will be the process of review and enactment of legislation by EU legislative bodies, deciding on the final form and operating legal framework of this digital currency before it can be widely deployed to users in the euro area.
