The EU will take the next crucial step on Wednesday towards launching a digital version of the euro, a controversial project that has come under attack from the public, politicians and banks before it has even been officially proposed.
The European Commission, the EU’s executive arm, will present a legislative framework that would enable the introduction of a digital euro, a central bank digital currency (CBDC) that would complement cash and offer an alternative to private cryptocurrencies and payment services.
The digital euro would be an electronic form of money issued by the European Central Bank (ECB) and accessible to anyone in the euro area. It would be secure, user-friendly and free of charge, like cash is today. Users could pay with a digital euro using a card or a phone app.
The Commission and the ECB have been working closely together on the technical and legal aspects of a possible digital euro, taking into account their respective mandates and independence.
According to the Commission, a digital euro would support the EU’s digital finance and retail payments strategies, by providing an additional, innovative and safe means of payment that would enhance financial inclusion, competition and efficiency in the European payment sector.
A digital euro would also strengthen the monetary sovereignty of the euro area and increase the international role of the euro, as well as support the EU’s open strategic autonomy in the context of the global digital transition.
However, the idea of a digital euro has also faced criticism and opposition from various quarters, including some EU member states, banks and civil society groups.
Some critics fear that a digital euro could undermine the role of commercial banks in the financial system and reduce their profitability, as well as pose risks to financial stability and monetary policy transmission.
Others worry that a digital euro could erode the privacy and data protection of users, or facilitate illicit activities such as money laundering and tax evasion.
The Commission has said that it will address these concerns by ensuring that a digital euro respects the EU’s legal framework and values, as well as by consulting with stakeholders and conducting impact assessments.
The proposal will then need to be approved by the European Parliament and the Council of the EU, which represents the member states, before it can become law. The Commission estimates that it could take up to five years for a digital euro to be ready for use by the public.
