ECB Proposal: Benefits of Digital Euro Outweigh the Costs

The European Union will reportedly publish draft rules governing a digital euro this week.

The regulations provide the legal basis for the digital currency, assuming the European Central Bank (ECB) chooses to issue one, Reuters reported Monday (June 26).

“This puts at stake the desirable balance between central bank money and private digital means of payment,” according to a draft of the European Commission proposal — set to be published Wednesday (June 28) — that was viewed by Reuters.

According to the report, the proposal argues that the benefits of a digital euro are greater than the risks, and the price of not issuing a Europe-wide central bank digital currency (CBDC) could be significant.

The draft says that a digital euro would be “legal tender,” and thus have to be accepted as a form of payment. 

The document also says the CBDC would usher in a faster, stronger, more competitive market for retail payments and offer privacy, but would not be programmable. 

The ECB is expected to decide in October whether to move forward with a retail digital euro, though the digital currency must have legal backing in the EU to support its acceptance and usage.

Earlier this year, ECB President Christine Lagarde said that a digital euro could give Europeans more resiliency and autonomy, noting that many Europeans depend on payment apps and cards that are not European.

“So we just have to be careful,” Lagarde said. “Some people will call it sovereign autonomy; I prefer to call it resilience because that’s really what it is.”

PYMNTS also spoke earlier this year with Alexandre Maymat, head of global transaction and payment services at Société Générale, who argued that central banks will need to make a strong case for a new digital currency when traditional payment methods already meet consumers’ needs. 

“So far, we have not identified clear needs of European citizens that are not being properly met by traditional mobile banking or card payment means,” Maymat noted, adding that any plans to use the digital euro to limit cash usage will be a much tougher project. 

Some Europeans “use cash not because they’re unbanked but because they live in a digital desert,” he said. “So to put in place a digital currency aimed at solving the issues of citizens who are not digitally savvy is probably not the best way to reduce [the use of] cash.”