The Commission and the European Central Bank are preparing a digital euro – EK calls for comprehensive impact assessments

The European Central Bank (ECB) has in its objective a digital euro, which would operate alongside cash, to have as many cash-like features as possible, such as ease of use, high privacy protection, and low transaction costs.

EK has been closely monitoring the project since the beginning. The digital euro could have potential impacts for instance on digital identity, payment infrastructure, the future of cash, and the banking system.

While the objectives of the digital euro are commendable, the combined regulatory impacts from different EU initiatives remain still unclear. Comprehensive impact assessments, such as those on bank business models, financial structures, payment systems, and financial intermediation, should be conducted as soon as possible. Responsibility for, for instance, the availability of cash or the liability for the digital euro, should not be changed as a result and imposed on private merchants or banks in the future.

It is important to safeguard that conducting payments remains as easy in the future as it is now. Public authorities should not choose technological winners by the means of regulation. The question remains, if there is a risk that the digital euro would create an unhealthy dependency on public infrastructure, the core features of which remain still largely unknown. It is also essential to resolve in the upcoming preparatory process of the digital euro how data issues, how data issues, for example concerning consumer payments and consumption behaviour, is going to be regulated.

What is the digital euro?

The digital euro would not be a cryptocurrency but a digital central bank money available to consumers and businesses, which would be introduced to the market through intermediaries such as banks. The digital euro is not intended to replace banknotes and coins but would complement them as a means of payment. For citizens, the digital euro would not differ significantly from current payment methods.

Background and timeline of the project

The digital euro has been prepared by the European Commission and the European Central Bank (ECB), whose Council decided in July 2021 to conduct a survey on the possibility of introducing a digital euro as part of financial technology development. The ECB Council is expected to make a decision on the further development of the digital euro in the autumn of 2023.

Today, the European Commission presented two legislative proposals for the implementation of the digital euro. The proposals initiate the ordinary legislative procedure, in which both the Council of the European Union and the European Parliament form their position on the proposals. After this, trilogue negotiations begin, in which the Council and Parliament positions are reconciled with the Commission’s proposal.

The digital euro is expected to promote innovation and competition in the financial system and strengthen the EU’s strategic autonomy by strenghtening its economic and monetary self-determination. According to the ECB’s estimate, the earliest possible launch date for the digital euro is in 2026.