European Union Is Making Progress Towards The Digital Euro
(Last Updated On: 17. January 2023)
The European Central Bank is working on an electronic version of the common currency. At the same time, the ECB assures that the cash is not at risk. It is not yet certain whether the digital euro will be introduced – but work on it is progressing. The decision should be made in autumn 2023. However, it will probably take until 2026 before citizens can spend the euro electronically.
The Eurogroup statement
The Eurogroup has issued a statement bringing Europe closer to the possible launch of the digital euro. The digital euro project was launched in October 2021 and since then the Eurogroup (which means the body that the finance ministers of the member countries belong to) has regularly exchanged views on the most important policy issues.
The characteristics of the digital euro
At yesterday’s Eurogroup meeting, ministers discussed several important topics related to the digital Euro, such as:
- Ensuring user access to the central bank currency
- Securing privacy
- Protection of user trust
They also discussed how the digital euro should be designed to prevent money laundering, illegal financing and tax evasion while ensuring compliance with sanctions.
Ministers called for the digital euro to complement cash rather than replace it, and to be accessible to the public at low cost to end-users.
They stressed that the digital euro must ensure the financial stability of the Euro area by setting limits on the design of the digital euro while maintaining its attractiveness as a means of payment.
The Eurogroup supports exploring offline functionality that would cover a wider range of use cases and contribute to financial inclusion. This would make it easier for citizens to use the digital Euro in different scenarios.
The group also wants the digital Euro to have a Europe-wide reach. But it also should stimulate the innovation in the financial sector and be interoperable with other central bank digital currencies.
ECB Has The Final Say
In fact, the central bankers are very pleased that the largely unregulated cryptocurrencies have suffered a setback in 2022 with many bankruptcies and price drops.
However, the real competitors are Mastercard and Visa, Google Pay and Apple Pay. Because these companies which handle a large part of the electronic money transactions all have their headquarters outside the European Union, as emphasized by ECB President Christine Lagarde.
The Digital Euro project is seen as a way for the European Union to strengthen its open strategic autonomy, foster innovation in the financial sector and create benefits for citizens and businesses.
The Eurogroup called on all European and national institutions involved in the preparatory work for the digital euro to ensure a high level of innovation and ambition when exploring possible design and deployment options. The Executive Vice-President of the Commission also informed the Eurogroup about the preparatory work for a legislative proposal to regulate the main features of the digital euro.
The Governing Council will examine the results of the investigation phase in autumn 2023 before deciding on moving to the implementation phase.
Difference between digital euro and stablecoin
What could a digital Euro be used for? Officially, to enable electronic payments to meet the needs of a population moving towards a cashless society. It would also be a way to counteract the proliferation of stablecoins that in a way threaten European monetary sovereignty.
Compared to private stablecoins, a digital Euro would be guaranteed by the European Central Bank and would therefore be more secure and reliable.
But would it be a real cryptocurrency based on the blockchain? There is no answer to this question yet. The European Central Bank has stated that the use of distributed ledger technology is one of the hypotheses in this area, but a decision has not yet been made.
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