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The ECB stresses the urgency of developing the digital euro to maintain competitiveness in the global digital currency race.Europe's reliance on foreign payment providers like Visa and Mastercard is a key driver for creating a digital euro.The legal framework for the digital euro remains incomplete.The European Central Bank (ECB) has been urged to prioritize the urgency of developing the digital euro, as there are concerns that Europe could fall behind global competitors. The digital euro is a digital version of the euro currency that could serve as a unified means of payment across the 20 countries in the eurozone.
Evelien Witlox, project manager at the ECB, emphasized in an interview with Euronews the need to accelerate the development of the digital euro and establish more unified payment solutions within Europe. She noted that the most comprehensive payment systems currently available across Europe are controlled by companies outside the EU.
As of now, Europe lacks a pan-European digital payment solution. Currently, 13 of the 20 eurozone nations lack national card schemes, depending instead on global giants such as Visa and Mastercard. With cash use dwindling and cryptocurrencies gaining traction, this dependency has fueled the ECB’s pursuit of a CBDC.
Legal Framework and Accessibility Plans in Progress
The ECB first introduced the digital euro concept in October 2021. However, nearly 17 months after the European Commission proposed a legal framework, progress remains incomplete. This legislative delay has hindered the project’s advancement.
Witlox, however, maintained that discussions are moving well. She emphasized the importance of maintaining momentum in the legislative process to ensure that the digital euro will be fully ready when it is most needed. She said:
“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 scrutinizing the potential impact of the digital euro on the financial system, including effects on bank deposits and infrastructure costs. The digital euro is not intended to serve as a savings tool and will not earn interest. It will also feature a holding limit, though the exact cap is yet to be determined. The ECB aims to balance giving people access to central bank money and maintaining financial stability.
It was further stated that within the draft legislation, some provisions have also been included to ensure the digital euro is accessible to everyone, including a physical card, an offline option, and institutions to help users top up their cards. The ECB project manager suggested that in countries such as Italy, these institutions could serve as post offices, which can be open to everyone who needs assistance in opening a digital euro account or using it.
Witlox further affirmed that the ECB is still taking the lead in the development of CBDC, and it would be sad if they failed to take up the opportunity to design properly what they believe a retail CBDC should be.
“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,” she said.
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Temitope is a writer with more than four years of experience writing across various niches. He has a special interest in the fintech and blockchain spaces and enjoy writing articles in those areas. He holds bachelor's and master's degrees in linguistics. When not writing, he trades forex and plays video games.
