The European Commission recently published legislative proposals for two planned regulations on the introduction of the digital euro and on the provision of services related to the digital euro. The regulations are intended to ensure that cash is retained as legal tender in the euro area while meeting the challenges posed by the increasing digitization of the economy.
The European Central Bank is currently examining the possibility of introducing a digital euro in response to the challenges posed by ongoing digitization. The digital euro is intended to complement euro cash and provide a new digital payment option. The legislative proposal sets out the legal framework and the main cornerstones for the planned digital euro. The digital euro will only be usable via an account with a payment service provider. It is not possible to use the digital euro without an account on the basis of the current proposal.
Unlike book money, the digital euro would be central bank money as an electronic counterpart to cash. Currently, banknotes and coins are the only type of central bank money available to the general public. Book money, on the other hand, is private money issued by commercial banks. The digital euro is therefore intended to fill a gap and make central bank money issued by a public institution available in electronic form. After adoption by the European Parliament and the Council, it would ultimately be up to the European Central Bank to decide whether and when to introduce the digital euro.
Complementing the introduction of the digital euro, the planned regulations are intended to guarantee and ensure the acceptance of cash throughout the euro area so that people and companies have easier access to cash or central bank money in the form of the digital euro. To achieve this, the planned regulations will clarify what qualifies as legal tender and sets out the rules for the mandatory acceptance of cash and possible exceptions to this.
Member States are called upon to take measures to promote widespread acceptance of cash payments and to ensure sufficient and effective access to cash. In particular, the elderly and disadvantaged groups who are more likely to rely on cash payments should benefit from these measures.
The digital euro is intended to provide consumers with an alternative European payment solution. Similar to a digital wallet, the digital euro would be available for both online and offline payments. This means that device-to-device payments can be made without an internet connection and in remote areas or underground garages. For online transactions, the same level of data protection and security will be ensured as for existing digital payment methods. For offline payments, on the other hand, the aim is to provide a high level of privacy and data protection for users. The digital euro is intended to allow users to make digital payments with less disclosure of personal data than card payments. The Commission promises a high level of data protection, for example by separating user identity from payment data so that only certain reporting offices receive this information in order to be able to act in the event of suspected criminal activity.
Banks and other payment service providers in the European Union would be responsible for distributing the digital euro to citizens and businesses. Basic digital euro services would be offered free of charge to individuals. To promote financial inclusion, individuals who do not have a bank account could open an account at post offices or other public institutions. Merchants in the euro area would be required to accept the digital euro, except for small merchants who choose not to accept digital payments. This is intended to ensure that the digital euro is widely available and used.
The proposed measures are subject to the ordinary legislative procedure and must be examined, amended and adopted by both the European Parliament and the Council before they enter into force. Once the proposal has been adopted, the European Central Bank will make the final decision on the issuance of the digital euro. The ECB is expected to decide this fall on how to proceed with the project. If the project is given the green light, the digital euro could be available from 2027 at the earliest.
The proposed measures are intended to strengthen the role of the euro and reduce the further spread of other virtual currencies, in particular stablecoins. Unlike traditional stablecoins, the digital euro is on a par with cash and is a legal tender whose face value is fixed. Whether the digital euro will be based on DLT technology has not yet been decided. The European Commission regards the digital euro as an important foundation for further innovation and as a protection of the EU's monetary sovereignty in the face of developments in the field of digital currencies.
by Philipp Ley
