The EU Commission wants to promote competition in European payment transactions and create the legal basis for a digital euro. On Wednesday, she presented a reform package that also includes a legislative proposal for the possible introduction of a digital version of the European common currency in competition with payment services such as Paypal or Apple Pay. The EU states and the EU Parliament still have to approve the Commission’s proposals. Changes are therefore likely.
The EU Commission assumes that a digital euro could be put into circulation in 2028 at the earliest. “In practice, this proposal will lead to more innovative financial products and services for users and stimulate competition in the financial sector,” the Commission said in Brussels. The euro is the world’s second most heavily traded currency, said EU Commission Vice President Valdis Dombrovskis. “We cannot afford to lag behind in this area.”
With the legislative proposal, the Commission aims to give consumers and companies an additional choice to the current private options, the Brussels authority said. In the future, you could also pay digitally with a widely accepted, cheap and secure form of money. The digital euro is intended to supplement cash and be stored in a digital wallet, for example on a mobile phone. The proposed law creates a legal framework, the Commission said. Ultimately, however, it is up to the European Central Bank (ECB) to decide whether and when to put a digital euro into circulation.
According to the plans so far, the Governing Council of the ECB wants to decide in October whether the project will finally be given the green light. The subsequent preparatory phase could last two to three years, ECB Director Fabio Panetta recently said. The digital version of the common currency could then be brought into circulation as a means of payment in about three or four years.
“For us, it is crucial that the digital euro complements cash and does not replace it.”
When asked, the Federal Ministry of Finance stated that the Federal Government believes that the digital euro could bring many advantages to users. “It is crucial for us that the digital euro supplements cash and does not replace it,” said the Ministry of Finance. “In addition, the digital euro must offer the same protection of privacy as cash. Under these premises, it can be an important driver for innovation that creates more security in digital payment transactions and reduces dependencies.” The federal government will carefully examine the proposal of the EU Commission.
The ECB welcomed the Commission proposal. It is crucial to ensure that the digital euro brings benefits to people, said ECB Director Panetta. This would transfer the estimated characteristics of the cash to the digital world. The Commission explained that private individuals and companies could pay with the digital euro at any time and anywhere in the euro area. It is important that it can be used both online and offline. Payments should therefore also be possible from device to device without an Internet connection. According to the Commission’s proposal, online transactions should be guaranteed the same level of data protection as with existing digital means of payment. With offline payments, users would disclose less personal data than they do today with card payments, for example. ‘Nobody would be able to see what people are paying for when using the digital euro offline,’ according to the Commission.
According to the Brussels authority, banks and other payment service providers should distribute the digital euro to consumers and companies. Basic digital euro services should be free for consumers. “The digital euro could also be a solid basis for further innovations, enabling banks to offer their customers novel solutions.” Traders in the euro area should be obliged to accept the digital euro. The Commission sees exceptions for very small retailers who do not want to accept digital payments.