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Digital Euro: Security and Resilience in 2024

Цифровой евро: безопасность и устойчивость в 2024 году

1. Introduction: What Is the Digital Euro and What Are Its Foundations?

The digital euro is a digital currency currently being developed by the European Central Bank (ECB), intended for use by citizens and businesses (retail CBDC). At the time of publication, the project is in the preparation and rule-finalization phase (scheduled until October 2025), during which technical and legislative details are being approved.

The fundamental principles are established in the European Commission proposal COM(2023) 369 final.

1.1. Legal Status and Guarantees

The digital euro will be a direct liability of the central bank, rather than a commercial bank. This means it will be classified as central bank money (retail CBDC).

Crucial consequence: Funds in digital euros are not covered by the Deposit Guarantee Scheme (DGS), as the DGS only protects deposits in commercial banks. However, the risk of losing funds due to the bankruptcy of a provider (PSP) is non-existent, as the money is effectively held on the ECB's balance sheet.

1.2. Technological Basis and Division of Roles

  • The ECB will provide the base infrastructure and settlement mechanism but will not have access to users' personal data or transaction history.
  • Payment Service Providers (PSPs) — banks and other licensed operators — will manage wallets, conduct AML/CFT checks, and interact directly with customers.

1.3. Privacy Guarantees and Limits

  • Online Transactions: PSPs will see data necessary for AML checks in accordance with GDPR regulations. Using this data for commercial purposes without consent will be prohibited.
  • Offline Transactions: For payments made without a network connection, proposal COM(2023) 369 final (Article 41, para. 4) provides for a high level of privacy from the PSP. Providers will not have access to the details of such transactions. However, this is not absolute anonymity: data is stored on the participants' devices and may be accessible to law enforcement agencies via a court order.

2. Preventive Measures: How to Minimize Risks?

Risk 1: Blocking Due to Suspicious Operations (AML Algorithms)

  • Problem: An account may be frozen due to links with operations that the system deems suspicious (e.g., receiving funds from a counterparty on a sanctions list).
  • Solution: Verify counterparties before conducting a transaction using official registries (e.g., the EU Sanctions Map). When working with crypto-assets, use blockchain explorers to check addresses for risk labels.

Risk 2: Use of Unaccredited Services

  • Problem: Using unlicensed wallets and exchanges deprives you of legal protection.
  • Solution: Use only PSPs from official registries, which will be published on the websites of the ECB and national central banks.

Risk 3: Cybersecurity and Device Compromise

  • Problem: Loss of funds due to phishing, malware on a smartphone, device theft, or PIN/biometric compromise.
  • Solution:
    • Multi-Factor Authentication (MFA): Always use MFA (e.g., SMS code + PIN).
    • Strong Passwords and PINs: Avoid simple combinations.
    • Antivirus Software: Install and regularly update security software on all devices.
    • Vigilance: Do not click on suspicious links or install applications from unofficial sources.

Risk 4: Loss of Wallet Access

  • Problem: Device loss, forgotten passwords, or software failure could lead to loss of access to funds.
  • Solution: The system will likely include recovery mechanisms. Create and securely store backups of access keys or seed phrases in advance if provided by your PSP. Consider using hardware security keys for additional protection.

Risk 5: Violation of Holding Limits

  • Problem: To prevent capital flight from commercial banks, storage limits will be introduced (Article 16 of proposal COM(2023) 369 final).
  • Solution: Monitor official information. The threshold publicly discussed (around €3,000) is an unconfirmed and non-final figure. Exceeding the limit will likely lead to an automatic transfer of the surplus (the “waterfall” mechanism) to a linked commercial bank account. Ensure you receive notification from your PSP regarding the setup of this mechanism.

Risk 6: Offline Transaction Risks

  • Problem: While offline payments are convenient, they carry risks of double-spending and are vulnerable if a device is lost or stolen.
  • Solution: The mechanism will include technical limits (e.g., no more than €150 per single transaction and no more than €1,000 until the next network synchronization). Transaction data is stored on the device and synchronized upon connection. If a device is lost, immediately notify the PSP to block offline functions.

3. Action Plan for Account Blocking: Step-by-Step Instructions

Visual Action Scheme

[Step 1: Request to PSP (24 hours)] →
[Step 2: Official Appeal (up to 15 business days)] →
[Step 3: Dispute Escalation (1-3 months)] →
[Step 4: Legal Proceedings]

Step 1: Emergency Measures (First 24 Hours)

  1. Request an official explanation. Immediately contact your PSP via official channels and request a written explanation for the blocking. Important: According to AML legislation, in some cases, a PSP may be prohibited from notifying the client of the specific reasons (“tipping-off”). Nevertheless, the request must be documented.
  2. Collect evidence. Prepare documents confirming the legality of the transaction (see Section 4).
  3. Do not move funds. Do not attempt to transfer blocked or related funds. Consult a lawyer first, as this could be interpreted as an attempt to conceal assets.
  4. Save everything. Take screenshots, save correspondence, receipts, and email metadata (headers).

Step 2: Official Appeal (Estimated Response Time: up to 15 Business Days)

Send the collected document package to your PSP with a demand to review the decision. According to EU Directive 2015/2366 (PSD2), Article 96 (verified: 15.10.2024), a licensed PSP is required to respond to a complaint within 15 business days. In exceptional cases, this period may be extended to 35 days.

Step 3: Dispute Escalation (Estimated Review Time: 1–3 Months)

If the PSP does not respond or the response is unsatisfactory, contact regulators through the European FIN-NET network
(ec.europa.eu/fin-net).

Procedures for key jurisdictions:

  • Germany: File a complaint with the financial regulator BaFin (via the online form on their website) or the ombudsman Schlichtungsstelle bei der Deutschen Bundesbank.
  • France: Contact the ombudsman Médiateur de l’AMF (via the website form) after receiving a final response from the PSP.
  • Italy: File an appeal with the Arbitro Bancario Finanziario (ABF). The procedure is entirely online and requires a prior complaint to the PSP.
  • Spain: Send a complaint to the Banco de España through their electronic office after the PSP's response deadline has passed.

4. How to Prove Source of Funds

Prepare a digital document package (PDF). For legal entities, it is recommended to use digital documents with integrity controls (verification of digital signatures or hash sums).

Hierarchy of documents (from highest to lowest priority):

  1. Agreements and contracts: Employment contracts, service agreements, sales contracts.
  2. Invoices and receipts.
  3. Bank statements showing the flow of funds.
  4. Tax documents: Declarations confirming legal income.
  5. Business correspondence confirming intentions and transaction details.

5. Official Communication Templates

Recommendation: Save not only the text of the emails but also their metadata (screenshots of the sent folder, email headers), which can serve as proof of the fact and time of sending.

Template 1: Initial Request to the Provider

Subject: Official inquiry regarding account status [Account Number/ID]

Dear [PSP Name] Support Team,

I am writing to report a restriction on access to my account [Account Number/ID], discovered on [Date].

I request a written official explanation stating the reasons for the block and references to the relevant legislative clauses or your user agreement, if such disclosure is permitted by law.

Please also provide the status of the funds in the account and a list of actions required to lift the restrictions.

Sincerely,
[Your Full Name]
[Date]

Template 2: Complaint to Regulator/Ombudsman

Subject: Complaint regarding the actions of [PSP Name] — Unjustified account blocking [Account Number]

Dear [Regulator/Ombudsman Name],

I, [Your Full Name], am filing a complaint against the payment service provider [PSP Name] regarding the blocking of my account [Account Number].

On [Date], my account was blocked. My inquiry to the provider dated [Date] did not result in a resolution within the timeframe established by the PSD2 Directive (15 business days). I believe the provider's actions are unlawful.

I am attaching documents confirming the legality of my transactions and a copy of the correspondence with the provider.

I request that you review this complaint and assist in resolving the dispute.

Sincerely,
[Your Full Name]
[Contact Information]
[Date]

6. Legal Aspects and Risks

Warning: At the slightest suspicion that the block is related to a criminal case or upon receiving requests from law enforcement agencies, immediately seek consultation from a lawyer specializing in financial law. Do not take any action with the funds until legal advice is obtained. Attempting to move them could be qualified as money laundering or obstruction of justice, resulting in criminal liability.

Appendix 1: Quick Checklist

Prevention:

  • Check counterparties via sanctions lists (EU Sanctions Map).
  • Use only licensed PSPs from official registries.
  • Enable MFA and biometrics on your device.
  • Create and securely store a backup of keys/seed phrases.
  • Keep documents for all major transactions (contracts, invoices, digital signatures).

In Case of Blocking (Emergency Actions):

  • Step 1: Formally request the reason for the block from the PSP and record the communication.
  • Step 2: Gather the document package (contracts, invoices, statements, correspondence). Save email metadata.
  • Step 3: DO NOT move funds. Consult a lawyer.
  • Step 4: File an official appeal with the provider, attaching the documents.
  • Step 5: If no response within 15 business days — file a complaint with the financial ombudsman (via FIN-NET) and the national regulator.
  • Step 6: If a criminal case is suspected — immediately cease communication and contact a lawyer.

Conclusion

The implementation of the digital euro will simplify settlements but will require users to pay increased attention to security and legal procedures. Proactive risk management, thorough documentation of operations, and knowledge of dispute resolution procedures are the three pillars upon which the security of your funds will rest in the new digital reality.

Tags

digital euro
central bank digital currency
ecb digital currency
financial security and resilience
payment service providers