European Commission proposes legal framework for a digital euro

The European Commission has proposed a legislative framework that would establish the legal basis for a potential ЕЦБ digital euro as a complement to cash.

The euro is a symbol of Europe’s unity and strength.

For more than two decades, people and businesses have been accustomed to paying with euro coins and banknotes.

And this would not change with a digital euro ↓

— European Commission (@EU_Commission) June 28, 2023

“The digital euro will give consumers an alternative pan-European payment solution in addition to the options currently available. This means greater choice and a stronger international role for the EU’s currency,” the Commission said in a statement.

CBDC will work as a digital wallet. Users will also be able to conduct offline transactions.

The digital currency would offer a higher level of privacy compared with existing solutions such as payment cards.

The dissemination of the digital euro will be handled by banks and other financial service providers. For individuals, the basic CBDC functions would be free. To broaden access, users would be able to open accounts at post offices and other government offices, including local authorities.

Merchants would be obliged to accept the digital euro as legal tender in the EU. The exception would be small traders for whom the cost of building the necessary infrastructure would be disproportionately high.

“Broad access to and use of the CBDC will also be important for the EU’s monetary sovereignty — especially if other central banks around the world begin issuing digital currencies. Moreover, this matters in the context of the development of the cryptocurrency market,” the European Commission said.

The proposed document must receive approval from the European Parliament and the EU Council. The final decision on issuing the digital currency, as well as the technical aspects of the work, remains with the ECB.

The Commission’s package of complementary legislative initiatives also includes a proposal to protect cash’s role as a means of payment and to facilitate access to it for citizens and businesses in the euro area.

Announcing in May the development of the legal framework for the digital currency, Fabio Panetta, a member of the ECB’s Executive Board, forecast that its issuance would take about 3-4 years.

By September, the central bank is to complete the nearly two-year study, the results of which will determine the regulator’s view on the viability of a digital euro.

According to ECB President Christine Lagarde, CBDC will eliminate the risks to the EU’s financial sovereignty.