Update Dec. 23, 11:47 am UTC: This article has been updated to include quotes from Karel Lannoo, CEO of think tank Center for European Policy Studies

The Council of the European Union has backed the European Central Bank’s (ECB) digital euro design, which includes both online and offline functions.

The council said on Friday that it agreed with the ECB on simultaneously launching online and offline variants of the central bank digital currency, breaking with earlier proposals that focused just on the privacy-heavy offline version.

The digital euro would be issued by the ECB and can be used at any time, even if a user isn’t connected to the internet.

ECB President Christine Lagarde had said on Thursday that the design of the digital euro was ready and its future rested with EU lawmakers.

“It’s now for the European Council and certainly later on for the European Parliament to identify whether the Commission proposal is satisfactory, how it can be transformed into a piece of legislation or amended.”
Europe, ECB, Euro, European Union, CBDC
Christine Lagarde urged EU lawmakers on Thursday to act as the digital euro was ready. Source: European Parliament

The offline digital euro’s limitations

Documents reveal that a cash-like currency prevents observers from linking multiple activities to the same user. The blueprint for the offline digital euro takes it up a notch by having transaction data never leave the direct participants.

The system is meant to allow authorized devices to transfer digital euro central-bank-signed tokens during in-person transactions.

Payments are supposed to be processed via near-field communication (NFC), which requires the devices to be in close proximity to each other.

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Some commentators have said the proximity requirement would be difficult to enforce. A relay attack, where an attacker places proxy devices near the receiving and sending devices to bridge the NFC signal over the internet, would be hard to avoid, making some online non-proximity use by advanced users difficult to curtail.

An expert opinion piece by the European Data Protection Board admits that “the available countermeasures are very limited.” The document concludes that “we will not consider physical proximity as a property of cash that can be reliably enforced in a digital currency.”

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Private, but not like cash

The offline digital euro, and the private keys used to manage it, would be stored in the secure elements of certified devices, such as mobile devices and smart cards.

Authorized wallet devices must be registered with payment service providers using their unique device ID, linking them to an identity for anti-money laundering purposes.

Karel Lannoo, CEO of think tank Center for European Policy Studies, told Cointelegraph that other than integration with private payment systems and choice of the payment system itself, privacy is the biggest issue for the digital euro.

“The actions of Trump have been a big help to have it done quickly. I expect indeed ECB timetable, interaction with merchants, and big roll-out. But communication will be extremely important,” he said, adding:

Remember, we are probably [two] years away from start, and outreach to Europeans has not started at all. Remember how early we start with the euro campaigns in 1997!”

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