The digital euro is approaching: after the green light from the Economic Affairs Committee of the European Parliament, the dossier is now expected in the Chamber in July, where MEPs will be called to express their opinions on the regulation that defines the legal framework of the new digital currency issued by the European Central Bank.
But be careful: the vote in July will not mean the immediate introduction of the digital euro: it will only represent the most important parliamentary step before the final phase of the discussion with the Council of the European Union. And only after the final agreement can the technical standards, operational tests and the subsequent phased introduction period be completed.
What changes after the first green light
These are the characteristics of the digital euro: it will be issued by the ECB, it will have the same value as the euro in cash, it can be used both online and offline, it will be free for citizens and will have to accompany cash and not replace it.
However, various operational aspects remain to be defined, including the maximum limit of digital euros that can be held by each person, the technical methods of use and the definitive rules for banks and payment operators.
The vote in July will be the real test
If the Assembly also gives the green light, the final phase of negotiations will begin with the Council of the European Union to arrive at the final text of the regulation. Subsequently, the ECB will have to complete the technical infrastructure, prepare the field tests, define the operating rules and start a gradual introduction period expected to last at least 24 months.
For this reason, even in the most favorable scenario, the digital euro will not come into circulation before the end of the decade.
How the digital euro will work
Citizens will be able to store the digital euro in a digital wallet or on a dedicated medium and use it to:
- shopping in stores;
- online payments;
- transfers between private individuals;
- operations even without internet connection.
One of the declared objectives is to reduce Europe’s dependence on large international payment networks such as Visa, Mastercard and PayPal by offering a fully European infrastructure.
Commissions and limits
The regulation aims to guarantee the absence of costs for citizens. Commissions regulated by law are foreseen for merchants, with the aim of reducing the costs currently incurred through private circuits.
To avoid effects on the banking system, the regulation also provides for a maximum limit to the digital euros that can be held by each citizen. The definitive amount will be established in the subsequent phases on the basis of indications from the ECB.
Furthermore, the digital euro will not produce interest, so as not to incentivize the movement of deposits from current accounts to the new instrument.
The cash will remain
One of the most discussed topics concerns the future of cash: on this point the position of the ECB and the European Parliament remains unchanged: the digital euro will have to complement physical money and not replace it. During the debate the phrase “one euro will remain one euro” was reiterated several times, regardless of whether it is paper or digital.
Also for this reason the project provides the possibility of making offline payments, trying to guarantee a higher level of confidentiality compared to current electronic systems.
For and against
Those in favor argue that the digital euro can strengthen European autonomy in payments, reduce commission costs and offer a public instrument accessible even to those who currently use banking services little. Those against fear the tightening of the use of cash and controls on transactions. The banking sector also remains highly perplexed, fearing a reduction in revenues.
