Comments from ECB board member Fabio Panetta come just one day before an EU vote that is likely to impose KYC/AML controls on all cryptocurrency transactions.
The European Central Bank is still considering the introduction of a central bank digital currency (CBDC) — a digital euro. The project has progressed, consultations have been ongoing since 2020, and activity has accelerated in recent months.
One of the central issues remains the balance between preserving user privacy and complying with EU regulations and financial policy. While the ECB seeks greater regulatory compliance, one official told legislators that a proposed digital euro could still offer users “a degree of privacy.”
There will not be “full anonymity”
Users of the digital euro would be required to meet Know Your Customer (KYC) obligations and comply with anti-money laundering (AML) rules.
ECB board member Fabio Panetta said on Wednesday that these requirements might be relaxed for small-value payments but would not be eliminated altogether.
“Full anonymity is not a realistic option from a public policy perspective,” Panetta told the European Parliament’s Economic and Monetary Affairs Committee in an interview.
According to Panetta, allowing complete privacy for a central bank digital currency would increase the risk of illicit activity within the system.
“Moreover, it would effectively prevent limiting the use of the digital euro as a form of investment,” he added.
“Simplified” AML/CFT rules for low-value payments
The ECB official explained that a ban on anonymous transactions is necessary to preserve financial stability. However, AML and counter-terrorist financing (CFT) requirements could be eased for small sums.
“For lower-value online and offline payments, a greater degree of privacy could be considered,” Panetta said in his Wednesday remarks. “These payments could be subject to simplified AML/CFT checks, while higher-value transactions would undergo standard controls,” he added.
Panetta’s remarks come a day before EU lawmakers vote on a proposal intended to eliminate anonymous cryptocurrency payments — even for small transfers. The vote is expected on Thursday.
If the proposal is adopted, it would mean that every cryptocurrency transaction would be subject to KYC, AML and CFT checks.