Brussels: The European Union is preparing to introduce a digital version of the Euro despite the opposition of various national leaders and banks. The European Commission has proposed establishing a legal framework for the digital Euro. This concept is on its way to becoming a reality.
The proposal will make the currency available to eurozone residents and visitors, as well as provide citizens with an additional online and offline payment option via their digital wallets. This is done to avoid duplication. However, in order for this law to take effect, it must be supported by all 27 EU member states as well as the European Parliament.
Digital currency will be given legal tender status. Small businesses that do not accept digital payments will be able to opt out as well. The ECB expects to approve the digital euro in October. The bank also believes that it can be made available from 2027 onward.
There is no turning back from digital.
The Euro is the world’s second-most traded currency. Therefore, European Commission Vice President Valdis Dombrovskis said that the concept of digital currency cannot be backed away from.
Given the rise of electronic payments, more than 100 central banks around the world, including China, the United States, Jamaica, and Japan, have already implemented digital currencies. The ECB points out that the change in people’s spending patterns is driving banks to take this step.
Christine Lagarde, president of the European Central Bank (ECB), proposed the concept of a digital euro in 2020. Then public consultation regarding this was started.
Concerns of banks
Banks and political leaders have warned that the transition to the digital euro is risky. Banks say operations will be at risk if customers can keep their money in digital euro accounts and wallets. To avoid this, the European Banking Federation has proposed digital transaction limits. An earlier ECB study discovered that the public is concerned about payment privacy.
German MEP Markus Ferber criticised that the ECB and the Commission for having yet to put forward a compelling argument for the need for a digital euro.
ECB’s position
The ECB says that it is considering the long-term benefits of the digital euro. The ECB also points out that the global card payment market is currently dominated by the US giants Visa and Mastercard. The ECB previously proposed that only transactions of up to 3000 euros be conducted using the digital euro.
The ECB has clarified that the digital euro will not endanger privacy. Mairead McGuinness, the EU’s Financial Services Commissioner, explained that this is not a large project for online payments. He says that the digital euro will be as secure as current digital payments.
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