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The central bank of Germany and the Massachusetts Institute of Technology (MIT) will collaborate to examine various facets of central bank digital currency (CBDC) design, with a focus on security and privacy.
Deutsche Bundesbank has joined the CBDC research initiative as part of MIT’s digital currency initiative (DCI). This was revealed by Joachim Nagel, President of Deutsche Bundesbank, during a presentation to MIT students.
He stated that the collaborative research aims to enhance security and privacy measures for CBDCs. Nevertheless, the official’s address primarily concentrated on the digital euro. Among the features of the planned European CBDC, the following were emphasized:
- the digital euro will ensure the utmost level of privacy;
- participants in the financial system will not have access to the personal data of digital euro users;
- users will be granted the highest possible degree of control over their personal information.
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Joachim Nagel pointed out the limited interoperability of bank cards even within the Eurozone, as well as the access that payment service providers and third-party services have to consumers’ payment data during transaction processing.
The primary risk associated with the launch of the digital euro, according to the official, is the potential disruptive effect of this financial instrument on economic stability and the banking system during crises, given that the CBDC is considered a risk-free asset. However, there are intentions to impose limits on the ownership of the digital euro to mitigate this risk.
No details regarding the anticipated timeline for the digital euro’s introduction were provided. The president of Deutsche Bundesbank merely mentioned that the project is in the preparatory phase — finalizing the regulatory framework for the digital euro and selecting suppliers for the development of the necessary infrastructure and platform.
In February 2024, representatives from the EU banking sector voiced concerns that the rollout of the digital euro could trigger a severe general economic banking crisis. Earlier this year, the European Central Bank (ECB) reported on advancements in establishing standards and regulatory guidelines for the European CBDC.
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