2023-06-28 12:37:56
The European Commission presented on Wednesday a legislative framework for the future digital euro, a dematerialized version of the single currency, a project that arouses conspiratorial fantasies and hostility from banks and which has yet to convince of its usefulness.
Electronic currency will only be a payment option, in addition to cash. Stored on a card or mobile phone, it will allow online payments, but also payments without any internet connection which will preserve as much anonymity as coins and banknotes.What will it bring when dematerialized money has already been commonly used for decades through a multitude of financial services such as credit cards and more recently mobile payment applications?
“For now, the digital euro seems like a solution looking for a problem” to solve, quips German MEP Markus Ferber. The Commission and the European Central Bank (ECB) “have yet to explain convincingly why we need it”.
The digital euro will be “accessible to everyone, everywhere and free of charge” in the 20 countries that have adopted the single currency, explained the Vice-President of the European Commission, Valdis Dombrovskis. It will provide “a public alternative” to private payment methods, largely dominated by the Americans Visa and Mastercard. “More than a hundred central banks around the world are currently working on introducing a digital version of their currency, Europe cannot be left behind,” he added. China is already testing the digital yuan on a large scale.
For the ECB, the increasing dematerialization of payments, in particular with the rise of e-commerce, requires the creation of an electronic euro, at the risk of seeing the single currency increasingly compete with cryptocurrencies or digital versions of currencies foreign. The Frankfurt institution launched a study phase in July 2021 to provide its coins and banknotes in electronic form from 2027 or 2028.
She announced on Wednesday that she would decide “in the fall” on the follow-up to the project, welcoming the Commission’s text which will set the legal framework, once approved by MEPs and the 27 Member States.
The digital euro above all raises concerns fueled by disinformation campaigns. Internet users claim on social networks that it would aim to eliminate cash to allow generalized surveillance of citizens, through the control of their purchases and financial transactions.
“No +Big Brother+”
“Cash will not disappear,” assured the European Commissioner for the Economy, Paolo Gentiloni. “This is not a ‘Big Brother’ project,” Financial Services Commissioner Mairead McGuinness told a press conference in Brussels. “With the digital euro, data privacy will be the same as for existing digital means of payment. With online payments it will be even higher.”
Electronic currency will be legal tender throughout the euro area. But very small businesses and certain non-profit associations will be able to refuse to receive it in payment, as will individuals in the context of their personal transactions, according to the draft regulations.
A universal and free service, the digital euro might make life easier for the four million Europeans currently without bank accounts, while online payment is becoming a basic need. The project “contains many positive advances for consumers”, welcomed Monique Goyens, director general of the European Consumers’ Bureau (BEUC). “It is high time to break the dependence on large international payment card systems”.
But banks are worried regarding possible revenue losses and risks to financial stability if individuals massively withdraw deposits from their current accounts and store them in digital euros. Like coins and notes, they will not be recorded on their balance sheet.
To reassure financial institutions, the Commission’s text provides that the ECB “will develop instruments to limit the use of the digital euro as a store of value”. Clearly, it will impose on each individual a ceiling amount of euros held in this form. It might reach 3,000 euros, an ECB official suggested in May.
Users “will not have a contractual relationship with the ECB”, further specifies the text. The digital euro will be distributed by banks which will be able to integrate it into their existing services. “A digital euro, if well designed, might support Europe’s strategic autonomy,” the European Banking Federation said in a statement. But “to protect banks from the risk of deposit flight (…) it is important to set limits”, she pleaded.
The European Commission presented on Wednesday a legislative framework for the future digital euro, a dematerialized version of the single currency, a project that arouses conspiratorial fantasies and hostility from banks and which has yet to convince of its usefulness.
E-currency will only be a payment option, in addition to…
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