The European Central Bank’s digital euro project confronts a structural tension between preserving individual privacy rights and ensuring regulatory compliance with anti-money laundering obligations. This paper examines the current state of the digital euro’s institutional development, technical architecture and privacy design, situating the European initiative within the broader international landscape of central bank digital currency implementations. Drawing upon official ECB documentation, a review of operational Central Bank Digital Currency deployments in selected jurisdictions, and empirical survey research on European privacy preferences, the analysis identifies a series of open problems that the current uniform pseudonymisation model leaves unresolved. A central observation of this analysis is that the ECB’s current design conditions privacy protection on the payment medium rather than on transaction risk, reserving strong anonymity guarantees for offline transactions while leaving online payments, where the overwhelming majority of economically significant activity occurs, subject only to structural pseudonymisation. Building on this analysis, the paper introduces the concept of graduated functional anonymity as a possible alternative framework warranting further investigation, outlining a three-tier privacy architecture that relocates the discriminating variable from the payment medium to the transaction amount, extending meaningful privacy protections to the online channel proportionally to transaction value and money laundering risk. The analysis further situates the proposed framework within the broader context of European digital sovereignty, arguing that a privacy architecture grounded in constitutional proportionality simultaneously serves as a contribution to European defensive resilience, limiting the strategic value of payment data in scenarios of financial infrastructure weaponisation. The proposal remains at a theoretical level, intended as a contribution to the ongoing scholarly and institutional debate rather than a prescriptive design recommendation.