The European Commission is currently working on drafting a bill for regulate the digital euro. This text will serve as the legal basis for the work currently being carried out by the European Central Bank on the development of the digital euro.
The digital euro, to compete with cryptocurrencies
In recent years, many central banks have been developing virtual currencies. This is the case of China, Sweden, Japan, the United Kingdom but also Europe. With the growing craze for cryptocurrencies, global banking institutions are looking for a way not to get completely squeezed out. The creation of a digital central bank currency (MNBC) would make it possible to compete, for innovative digital uses, with cryptocurrencies. To develop the digital euro, the European Central Bank “also starts from the observation of the decline of cash payments in favor of digital payment solutions in many European countries” according to CNIL.
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One of the biggest shocks was when Meta (formerly Facebook) announced a few years ago that it was planning to launch a virtual currency with 25 other companies. Finally, Mark Zuckerberg’s group abandoned this project a few weeks ago. The American giant sold, on January 31, 2022, its assets to Silvergate Capital Corporation, a California bank. Rumors had already been circulating for several days. A tweet and a press release came to clarify and formalize the situation. Nobody wanted one of the most powerful companies in the world be an issuer of a virtual currency.
Is the European Union already behind?
A broader movement has pushed policymakers to act. Fabio Panetta, member of the Executive Board of the European Central Bank, recently declared to MEPs that “If we don’t meet that demand, then others will. As lawmakers, you will play a key role in any changes to the European legislative framework that may be necessary to introduce a digital euro”.
The European Central Bank has been experimenting for some time. With the help of the European Commission, the banking institution plans to work on a prototype from 2023. The digital euro could be ready in 2025. A timetable that suits the legislative process of the European Union.
Once drafted, the bill will have to go through negotiations in European capitals and the European Parliament before becoming law. In parallel, a public consultation will be launched at European level next month. In 2020, an initial survey found that payment privacy was the top concern of respondents.
This time, the questionnaire drafted by the European Commission will focus more on how the digital euro could be used, for example to process daily payments. Banks are not yet all in favor of adopting a digital euro. They fear that savers could convert their deposits into digital currency with a simple click, in the event of a financial crisis. Enough to create a major banking panic.
Last year, Germany and France urged the European Central Bank accelerate the process of developing a digital currency, fearing that the euro zone will be left behind. In China, 140 million people already use the digital yuan.