2023-06-28 20:33:18
The European Commission presented, on Wednesday, a legislative framework for the digital euro, which it intends to launch in the future, in a project that raises conspiracy theories and collides with the hostility of banks, and its feasibility must still be proven.
The electronic currency will only be an additional and optional payment option, in addition to the cash payment option. Also, this option, which depends on payment by card or mobile phone, will allow the feature of payment without an internet connection, which keeps the user name confidential.
What is new that the digital euro will offer at a time when the use of electronic currencies has spread for decades through a variety of financial services such as credit cards and, more recently, payment applications on mobile phones?
European option?
“At present, the digital euro seems to be a solution in search of a problem,” German European MP Markus Ferber quipped, adding that the European Commission and the European Central Bank should “explain convincingly why we need it.”
European Commission Vice-President Valdis Dombrovskis said the digital euro would be “available to everyone, everywhere and for free” in the 20 countries that adopt the single currency, adding that it would provide a “government option” for private payment methods dominated by the US companies Visa and MasterCard.
Dombrovskis continued, saying, “More than a hundred central banks around the world are currently working on adopting a digital version of their currencies. Europe cannot remain behind,” at a time when China has begun testing the digital yuan on a large scale.
The European Central Bank believes that the increasing reliance on digital currencies in payments, especially with the boom in electronic commerce, necessitates the creation of a digital euro, although it will face increasing competition from cryptocurrencies or from digital copies of other foreign currencies.
The bank, which is headquartered in Frankfurt, launched in July 2021 a study phase of the project with the aim of presenting the electronic version of the single European currency, starting from 2027 or 2028.
And the European Financial Institution announced on Wednesday that it would decide “in the fall” the next steps in its project, welcoming the Commission’s text that will define the legal framework after the approval of the European Parliament and the 27 member states.
The digital euro raises concerns fueled by disinformation campaigns, as some assert on social networks that it aims to abolish the monetary currency, to allow generalized monitoring of citizens by controlling their purchases and financial transactions.
Maintain confidentiality
However, Commissioner for Financial Services Mairead McGuinness confirmed during a press conference in Brussels, saying: “This is not a project of the ‘Big Brother’ style,” explaining that “with the digital euro, data confidentiality will be preserved exactly as with the currently approved digital payment methods. No, it will be greater for online payments.
The digital euro will be legally valid in the twenty countries that adopt the single currency.
However, small companies and some non-profit associations will be able to refuse to receive payments through it, and individuals will also be able not to adopt it in the context of their personal transactions, according to a copy of the draft law.
And the digital currency, which will be available in a global and free service, will be available to the four million Europeans who are currently deprived of having bank accounts at a time when making payments online has become a basic need.
Monique Guillen, Director General of the European Office of Consumer Associations, said that the project “contains a number of positive developments for consumers,” and said, “It is time to stop our dependence on major international payment card systems.”
A ceiling on the amounts that can be acquired
However, banks express concerns about the possibility of losing revenues and risks threatening financial stability, in the event that an intense demand of individuals is recorded to withdraw their deposits from their current accounts to store them in digital currency, which will remove them from the banks’ balance books.
Seeking to reassure financial institutions, the European Commission draft states that the ECB “will develop tools to limit the use of the digital euro as a reserve currency”.
This means that it will impose on each person a ceiling on the amounts that he can hold in this currency, which may be 3,000 euros, as suggested by a central bank official in May.
The text makes it clear that users of the digital euro will “not have a contractual relationship with the European Central Bank”, but that banks will distribute the electronic currency, which they will be able to integrate into their services available to customers.
The Association of European Banks said in a statement that “the digital euro, if designed in the right way, can support Europe’s strategic independence,” stressing, on the other hand, that “in order to protect banks from the risks of deposit flight … it is important to set limits.”
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