Next month, the executive arm of the European Union will begin public consultations on their central bank digital currency (CBDC) project. In addition, the European Commission will also be working on coming up with new legislation for establishing the digital euro and a draft is expected to be introduced in 2023. The bill that will be put forward by the European Commission would be tailored for establishing the legal foundation for the digital European fiat. This legislation will be helpful for the European Central Bank (ECB) in working on the technical aspect of the CBDC project.
The digital euro project had reached its investigation phase back in October 2021. Brussel’s executive body plans on rolling out the draft in the next year, but it wants to do public consultations about the digital euro before doing so. This had already been done by the ECB back in 2020 and it had revealed that financial privacy had been a major concern for Europeans. The focus of the European Commission is to seek answers for practical questions, such as how the digital euro will be able to facilitate everyday payments. Mairead McGuiness, the European Union’s Commissioner for Financial Services, disclosed the legislative plan. Speaking at a fintech conference, she said that they would have a legislative consultation in the next few weeks.
The bill will have to be coordinated with the legislatures and the governments of the member states by the European Commission before it is signed into law. The ECB is currently conducting tests for the digital euro and the monetary authority is hoping that they would have a prototype ready by the end of next year. They will also conduct an impact assessment for finalizing the project because this would help them in figuring out if a central bank digital currency (CBDC) could destabilize their financial system.
This would involve the Eurozone governors, who would decide whether it is worth it to introduce a virtual currency and a digital euro may be rolled out by 2025. While the final decision will be in the hands of the Governing Council of the European Central Bank (ECB), leading members of the European Union, such as Germany and France, have already been called in for improving their efforts in this regard. The primary fear of policymakers in the European Capital and Brussels is that they might end up lagging behind countries, such as China, Russia and the US, which are also developing their own digital currencies.
Monday marked the 20th anniversary of the day when euro coins and banknotes were issued. Speaking at the European parliament, Christine Lagarde, the President of the ECB, said that the plan for introducing a digital euro was not to replace cash, but it was meant to actually complement it. She said that their goal was to determine how it could become a cost-free and convenient means of payment for the people. A two-year investigation had been initiated by the ECB in October last year and they will decide whether to proceed or not at the end of this phase.