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25/06/24
153
ECB Publishes First Update on CBDC Progress
On June 24, the European Central Bank (ECB) published its initial progress report on the development of a central bank digital currency (CBDC). The major focus was on privacy provisions with a promise to ensure pseudonymization and hashing functions, as well as encryption features. This will ensure that individuals cannot be tracked by transaction.
According to the CBDC framework established by the apex bank, payment service providers are required to obtain explicit consent from individuals before they can use their financial data for commercial services.
The ECB highlighted the means to conduct offline transactions and the provision of support for offline transactions directly between parties without the need for a third-party intermediary. As stated in the update, settlements for such offline payments would be directly on the payment devices.
“The design of the digital euro includes an offline functionality that would offer users a cash-like level of privacy for payments in physical shops and between individuals. When paying offline, personal transaction details would only be known to the payer and the payee and would not be shared with payment service providers, the Eurosystem or any providers of supporting services,” reads the report.
The offline functionality requires users to pre-fund their digital euro account through the internet or an ATM before they can digital euro for payment without an internet connection. They are looking into the potential use of battery-powered smart cards or non-powered smart cards which use a bridge device to communicate.
The ECB revealed the completion of the digital euro Rulebook Development Group’s interim review of the first draft of the rulebook, as it expresses the rules and procedures aimed at standardizing digital euro payments across the euro area. An updated version of the digital euro rulebook is expected to be delivered by the end of this year and will address user identification and authentication.
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