With a legal framework now proposed, the EU will iron out technicalities around a digital euro that is set to make payments easier and more secure.
The European Commission has proposed a legal framework for the digital euro as an alternative to cash that will allow EU residents to pay digitally with a “widely accepted, cheap, secure and resilient form of public money”.
Published yesterday (28 June), the framework will provide a legal tender status for the digital euro and ensure it is widely accepted as a means of payment. People will be able to get digital euros through their bank on request, making it more accessible to the masses.
“The euro is the most tangible symbol of European integration”, said ECB president Christine Lagarde. “It is highly valued and trusted by citizens.”
However, while it would serve as a means of payment, the Commission has cautioned that the blockchain-based digital euro is not an investment tool.
According to the European Commission, electronic payments in the EU have grown from €184.2trn in 2017 to €240trn in 2021, a trend accelerated by the pandemic.
European finance chief Mairead McGuinness said early last year that a bill to introduce a digital euro could be tabled in the EU in early 2023.
In 2021, Lagarde had said that the ECB had decided to “move up a gear” and commenced an investigation phase into the design and distribution of a digital euro.
This investigation phase will conclude in October, after which the ECB will further develop and test “technical solutions and business arrangements”. A possible decision by the governing council to issue a digital euro would be taken only after the legislative act is adopted.
“The legislative proposal is key to ensuring that the digital euro brings value to the people, taking the appreciated features of cash into the digital sphere,” said ECB executive board member Fabio Panetta, who chairs the high-level task force on a digital euro.
Not a replacement for existing methods
The Commission stressed yesterday that the digital euro would be available “alongside existing national and international private means of payment” such as cards or apps and would work like a digital wallet that people and businesses can use to pay anyone anywhere in the Eurozone.
It also noted that the technology would be available for payments both online and offline, which means that people can use the digital euro to make payments even when their device is not connected to the internet.
“While online transactions would offer the same level of data privacy as existing digital means of payments, offline payments would ensure a high degree of privacy and data protection for users,” the Commission said.
“They would allow users to make digital payments while disclosing less personal data than they do today when making card payments, just like when paying with cash, and the same as what they disclose when they take cash out of an ATM.”
This also means that nobody would be able to see what people are paying for when using the digital euro offline. Moreover, merchants across the euro area – except very small vendors who choose not to accept digital payment – would be required to accept the digital euro.
“The digital euro could also be a solid basis for further innovation, allowing banks to provide innovative solutions to their clients,” the Commission went on, adding that the project still requires “significant further technical work” by the ECB in the coming months.
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