Germany’s central bank partners with MIT on digital euro privacy research

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Germany’s central bank has announced a partnership with the Massachusetts Institute of Technology (MIT) on central bank digital currency (CBDC) research.

Joachim Nagel, president of the Deutsche Bundesbank, took the stage at MIT to announce the collaboration. In his speech, he shared that the central bank will be cooperating with MIT’s Digital Currency Initiative (MIT DCI) on research into the security and privacy of a prospective digital euro.

“I am delighted to announce that the Bundesbank and the MIT DCI have agreed to cooperate in the field of CBDC,” Nagel told the students in his speech.

“The main focus will be research on pivotal design questions such as the implementation of data protection and privacy in a CBDC system – a topic that many citizens care a lot about, not the least in Germany.”

If it launches, the digital euro will be one of the world’s most important CBDCs, as the euro is the second-most traded currency after the U.S. dollar. However, the European Central Bank (ECB) continues to face challenges and scrutiny, not least the Big Brother ‘spy-coin’
claims from its detractors.

According to Nagel, the digital euro would be more private than existing digital payment systems as it eliminates third-party services.

“A digital euro would offer the highest possible level of privacy. The Eurosystem would not have access to digital euro users’ personal information. Consumers would gain more control over their personal data,” he told the students.

The regional digital currency would also aid the development of pan-European payment systems. Nagel observed that bank cards sometimes fail to work across jurisdictions even when linked to international payment networks like Visa (NASDAQ: V) and Mastercard (NASDAQ: MA).

However, the digital euro would be standardized and “work in day-to-day transactions throughout the euro area.”

Bundesbank becomes the fourth central bank to partner with the MIT DCI. In 2022, it collaborated with the Bank of England (BoE) and the Bank of Canada to explore technical approaches for their prospective CBDCs.

It also partnered with the Boston Federal Reserve on Project Hamilton to explore the technical feasibility of a digital dollar.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: CBDCs are more than just digital money