.svg)
Brussels’ has begun to pave the way for EU legislation to accommodate a retail central bank digital currency (CBDC), as the European Central Bank’s (ECB) project continues to take shape.
For a digital euro to be launched, additional legislation needs to be agreed by the EU’s three legislative bodies: the European Commission; the European Parliament; and the European Council.
This will ensure that it can be used concurrently with physical cash in the trading bloc.
In addition, legislative adjustments to current EU law may be needed to usher in a digital euro, as well as possibly to digital currencies issued by central banks of non-euro area member states, such as the definition of funds under the revised Payment Services Directive (PSD2).
Stakeholders now have until June 14 to respond to the European Commission’s consultation document on the subject, with the EU’s executive branch looking for feedback from the likes of payments and e-money institutions, as well as regulatory authorities, such as retail payments supervisors and financial intelligence units.
“The present targeted consultation complements the ECB’s public consultation,” the commission said in a statement, adding that it is looking for comments from the key industries and users that will come into contact with the new form of EU public money.
Of the issues that the commission is keen to address, its use alongside cash payments, data privacy issues and anti-money laundering/counter-terrorist financing compliance are all factored in.
The commission is also looking for feedback on how international payments could be made with a digital euro, considering the fact that it is likely to be used by tourists visiting the trading bloc.
Central bank work continues
Meanwhile, the ECB is currently investigating what a digital euro could potentially look like for the trading bloc in a phase that is expected to last until September 2023.
The Frankfurt-headquartered central bank first began exploratory work in October 2020, before announcing in July last year that it was keen to investigate the use of a proof of concept, retail CBDC.
The ECB has recently addressed both the European Parliament and EU finance ministers about the digital euro. In a presentation to finance ministers this week, the ECB discussed ways that the digital euro could respect the privacy of EU citizens — an issue that ranked highest in its original public consultation on the matter.
The ECB said that user anonymity is not a desirable feature, as this would make it impossible to control the amount in circulation and to prevent money laundering.
However, the Eurosystem should only be able to see the minimum transaction data required to validate digital euro payments, even if it decides to perform the settlement function, the ECB conceded.
The supervisory also suggested that anonymised/aggregate data on the use of the digital euro should be available to the Eurosystem under any privacy option for statistical, research, supervisory and oversight purposes, including to fight fraud and illicit activities.
In a statement released after the European Council’s Tuesday meeting (April 5), finance ministers said that they welcome the work being undertaken by the ECB on a possible digital euro, although they said that issues relating to retail digital payments as well as monetary policy and financial stability need to continue to be taken into consideration.
Finance ministers from the 27 member states also stressed the need to assess the impacts both on the member states inside and outside the eurozone, while noting that it can and should only complement physical cash and not replace it.
“In order to be successful, the launch of a digital euro needs to be a common European project, supported by the European public and with a solid democratic basis and would require an intervention of the EU legislator,” the communique said.
