ECB Calls for Accelerated Development of Digital Euro to Compete Globally
The European Central Bank (ECB) is under pressure to expedite the development of the digital euro to prevent Europe from lagging behind global competitors. The digital euro aims to provide a unified payment solution for the 20 eurozone countries.
Evelien Witlox, ECB project manager, highlighted in an interview with Euronews the necessity of advancing the digital euro and creating cohesive payment systems within Europe. Currently, comprehensive payment systems in Europe are largely controlled by non-EU companies.
Europe lacks a pan-European digital payment solution, with 13 out of 20 eurozone nations without national card schemes, relying on global entities like Visa and Mastercard. The decline in cash usage and the rise of cryptocurrencies have intensified the ECB's focus on a CBDC.
Legal Framework and Accessibility Plans in Progress
The digital euro concept was first introduced by the ECB in October 2021. Despite nearly 17 months since the European Commission proposed a legal framework, progress has been slow, hindering the project's advancement.
Witlox emphasized that discussions are progressing well and stressed the importance of maintaining legislative momentum to ensure the digital euro is ready when needed. She stated:
“Discussions have progressed and I can only reiterate the urgency to keep sufficient pace in this process so that we can ensure that the digital euro will be there when we really need it”
Balancing Financial Stability and Innovation in CBDC Development
European banks are evaluating the potential effects of the digital euro on the financial system, particularly regarding bank deposits and infrastructure costs. The digital euro will not serve as a savings tool or earn interest and will have a holding limit, yet to be determined. The ECB aims to balance access to central bank money with financial stability.
Draft legislation includes provisions to make the digital euro accessible, featuring a physical card, offline options, and institutions to assist users in topping up their cards. In countries such as Italy, post offices could help individuals open digital euro accounts.
Witlox reaffirmed the ECB's leadership in CBDC development, expressing concern over missing the opportunity to shape an effective retail CBDC. She stated:
“We are still at the forefront of the development [of a CBDC], it would indeed be a pity if we lose this opportunity to shape what we think a retail CBDC should look like.”