ECB Executive Board Member Fabio Panetta’s remarks come just a day to an EU vote likely to introduce KYC/AML checks for all crypto transactions.
The European Central Bank is still considering a central bank digital currency (CBDC) – a digital euro. There has been progress in the project, with consultations taking place since 2020 and gathering speed in recent months.
One of the key concerns remains the “trade-offs” between the need for privacy and adherence to EU financial regulations and policies. While the ECB wants to see greater regulatory compliance, an official has told lawmakers that the rollout of the proposed digital euro could allow for “some degree of privacy” for users.
Still no ‘full anonymity’
Digital euro users will need to comply with know-your-customer (KYC) checks as well adhere to anti-money laundering (AML) regulations.
However, these requirements might not be cast in stone when it comes to small payments, ECB Executive Board Member Fabio Panetta said on Wednesday.
“Full anonymity is not a viable option from a public policy perspective,” Panetta told the EU parliament’s Economic and Monetary Affairs Committee.
According to Panetta, allowing for complete privacy using the central bank’s digital currency would open the system risks of illicit transactions.
“In addition, it would make it virtually impossible to limit the use of the digital euro as a form of investment,” he added.
‘Simplified AML/CFT’ for small payments
To safeguard financial stability, prohibiting anonymous transactions is essential, the ECB exec explained. But there could yet be a slight ‘break’ from the anti-money laundering and combating of terrorism financing (CFT) norms- if the amounts involved were low value.
“A greater degree of privacy could be considered for lower-value online and offline payments,” Panetta said in a speech he delivered on Wednesday. “These payments could be subject to simplified AML/CFT checks, while higher-value transactions would remain subject to the standard controls,” he added.
The ECB official’s remarks come just a day before EU lawmakers vote on a proposal seeking to remove anonymous crypto payments- even for small transactions. The vote is expected on Thursday.
If passed, it would mean every crypto transaction would have to adhere to KYC, AML and CFT checks.