Since the launch of the investigation into the possible issuance of a digital euro in October 20211 in response to the invitation by Leaders at the Eurosummit, the Eurogroup has held regular exchanges of views on the key political dimensions of a digital euro.
The Eurogroup wades in on the digital euro project
This investigation does not prejudge any future decision on the possible issuance of a digital euro, which would only come after further exploration in a possible realisation phase.
The Eurogroup considers that the introduction of a digital euro as well as its main features and design choices requires political decisions that should be discussed and taken at the political level.
The creation of a digital euro would require an appropriate legal basis, involving the European Parliament and the Council of the European Union based on a legislative proposal by the European Commission.
The Eurogroup says it has now taken stock of the progress of the project. The ECB President presented the design and distribution options that were recently endorsed by the ECB Governing Council2.
The Eurogroup has now reaffirmed its support for the continued efforts of all European and national institutions involved in the preparatory work for the potential issuance, and encourages a high level of innovation and ambition in exploring its possible design and distribution options.
Depending on its design, a digital euro could play a key role in an increasingly digitalised economy by strengthening the open strategic autonomy of the European Union, reflecting the central geopolitical role played by payment systems, in fostering financial sector innovation and delivering benefits for citizens, businesses, and Member States, while preserving the role of central bank money as an anchor for our monetary system.
In line with its statement in February 20223 the Eurogroup discussed several key issues regarding the project over the last year and provided views4 on the general objectives and political dimensions, thereby complementing the work carried out by the ECB and the Commission, in full respect of the institutional roles and mandates of all actors involved.
During its discussions, the following issues were raised:
- A digital euro should complement, and not replace cash, and should guarantee access to central bank money for euro area users in times of increased digitalisation in payments5. It should be safe and resilient, ensure a high level of privacy, be easy and convenient to use and widely accessible to the public, including in terms of costs for end-users.
- To succeed, the digital euro should ensure and maintain users’ trust, for which privacy is a key dimension and a fundamental right. At the same time, the Eurogroup also considered that the design of a digital euro should comply with other policy objectives such as preventing money laundering, illicit financing, tax evasion, and ensuring sanctions compliance. A risk-based approach could be followed to allow for more privacy in the case of less risky transactions, which could ensure a wider adoption of the digital euro among citizens with a stronger preference for privacy. The Eurogroup also supports the exploration of an offline functionality which would serve a wider range of use cases and also contribute to financial inclusion by facilitating the use by citizens in different scenarios.
- A digital euro should aim to safeguard the financial stability of the euro area. Potential risks to financial stability should be limited, for example by imposing holding limits and constraints in the design of the digital euro, while maintaining its attractiveness as a means of payment. The parameters of such features should be further analysed and discussed based on a thorough quantitative analysis and their implementation should take into account the prevailing economic and financial environment. The design and introduction of a digital euro should not impair the ability and the independence of the European System of Central Banks in ensuring monetary transmission in order to fulfil its price stability mandate.
- Ensuring a pan-European reach of the digital euro whilst also catalysing innovation in the financial sector and complementarity with private solutions should be a priority. The digital euro ecosystem should leverage the strength and experience of public and private participants and build on European infrastructure. Whilst further work is needed on the precise allocation of competencies, its considers that supervised intermediaries could play an important role in the digital euro ecosystem.
- The digital euro could be a building block of the future architecture for state-of-the-art payment solutions. To this end, it could allow for initiating a payment automatically when predefined conditions are met – meaning that users would be able to program payments. As money however, digital euro should at all times and throughout the euro area be convertible at par with other forms of the euro, such as banknotes and commercial bank deposits. The digital euro therefore cannot be a programmable money6.
- Appropriate regulatory measures, including granting the digital euro legal tender status, should be considered in order to ensure consistency with cash and to make digital central bank money widely accessible for retail use to all end-users in the euro area, whilst taking into account the distribution of the costs and required technologies.
- The digital euro should focus as a priority on the needs and specificities of the euro area. Interoperability with other Central Bank Digital Currencies should be an important feature of the digital euro, including for cross-currency transactions. This will also take into account the development of CBDCs by other jurisdictions, in order to reap the potential benefits of faster, cheaper and safer cross-border transactions. On the other hand, the risks associated with the use of a digital euro outside the euro area must be mitigated and monitored.
1 See Press release.
2 See the ECB first progress report (September 2022) and second progress report (December 2022) on the investigation phase of a digital euro.
3 See Eurogroup statement adopted on 25 February 2022.
4 See Summing-Up letters of the relevant Eurogroup meetings on 12 July 2021, 10 September 2021, 8 November 2021, 25 February 2022, 4 April 2022, 11 July 2022, 9 September 2022 and 3 October 2022.
5 See for instance the Study on the payment attitudes of consumers in the euro area (SPACE).
6 There would for example be no restrictions in the types of goods and services to be purchased, or restrictions in time when a digital euro can be used.
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