While plans to usher in centralized, government-controlled money are receiving some pushback in the US, the consensus in the EU seems to be in favor of introducing a central bank digital currency (CBDC), i.e., the digital euro.
And now the question is how exactly to proceed, including by determining strategic objectives.
In the eurozone – made up of the 20 (out of 27) EU members that have adopted the euro – merchants might find themselves under obligation to accept a future European Central Bank (ECB) digital currency.
This is information from a paper that eurozone finance ministers were expected to discuss on Monday. The obligation proceeds from granting the EU CBDC the same status as cash, making it a legal tender.
The paper says that this course of action would make sure that the digital euro’s network effect and distribution are increased.
Another point the paper raises for ministers to debate is if there should be exemptions, whose goal would be “balancing the principles of contractual freedom and mandatory acceptance.”
The ECB is yet to formalize a decision on issuing its CBDC, but this is expected to happen in the fall, and meanwhile, EU bureaucrats are clearly busy finalizing the proposal, including technical issues and priorities.
Last week, the European Parliamentary Financial Services Forum heard from Financial Services Commissioner Mairead McGuinness that a bill will be presented in the near future, and that the ECB is at this point looking into key design and technical questions before making the decision.
But in order for the EU’s central bank to make that decision, regulation is needed, with the European Parliament’s and the European Council’s involvement.
The proposal is expected to be submitted in the second quarter of 2023, to establish the bloc’s CBDC and regulate it, including around issues like its legal tender status, privacy and anti-money laundering, financial stability, distribution and compensation, and the use of the digital euro outside the euro area, said McGuinness.
And earlier, in January, the finance ministers considering this – collectively known as the “Eurogroup” – noted that going for an EU CBDC is a political issue that requires political decisions.