The Commission’s proposals would allow people to store up to €3,000 digital euros in secure wallets and use them for both offline and online payments.
With more and more people using digital tools for their daily transactions, the European Commission on Wednesday presented a proposal to initiate a digital euro.
Digital currencies have been surging in popularity over the last few years as cryptocurrencies like Bitcoin have entered the mainstream. But unlike Bitcoin, the digital euro would be a Central Bank Digital Currency (CBDC), essentialy electronic cash.
The aim would be to give consumers an alternative European-wide payment solution, in addition to the options that exist today, the Commission says.
“With the digital euro, people will be able to pay in ‘public money’. Uniquely, they will be able to pay both online and offline,” Valdis Dombrovskis, the Commission’s Executive Vice-President said during a press conference.
“Having a topped-up digital euro wallet on your phone – or other device – will be the same as having coins and banknotes in your pocket. You will be able to pay just as easily. You don’t even need to have an internet connection.”
He added that “it will be legal tender, backed by the European Central Bank to make it universally accepted across the euro area”.
According to the Commission’s data, 55% of EU citizens prefer paying cashless, 22% favour cash while 23% have no preference.
This proposal has already faced a wide range of objections from people over privacy concerns or from commercial banks over potential bank runs which the EU’s executive sought to alleviate by stressing there will be clauses of safety for all the involved parts.
“Personal data would be fully protected. Banks, not even the ECB, would not see or be able to trace, people’s personal details or data. Offline payments would offer a similar level of privacy as cash does today,” Dombrovskis told reporters.
He added that a provision would limit how much money people could keep in digital euros in order to reassure bankers.
“While people would be able to store digital euros in their device, the amount would be subject to a ceiling as a way to protect financial stability and avoid any substantial outflows from banks,” he specified.
ECB officials have suggested a cap of €3,000.
The final law must be backed by the EU’s 27 member states and the European Parliament. The ECB is expected to give the green light to a digital euro in October so that it can be launched in 2027.
China became the world’s first major economy to launch a digital currency, in 2020. Countries including Jamaica, the Eastern Caribbean and Bahamas also already have such digital currencies in place.
The US is in the process of developing a digital dollar but experts say that this could take some more years to happen.
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