On 5 April 2022, the European Commission (the Commission) lunched a targeted consultation on a prospective establishment and regulation of essential aspects of a digital euro as a new form of central bank money.
The Commission recognises that there are wide ranging challenges that a prospective digital euro would need to tackle. These range from the reduced use of cash in an increasingly digitalised EU economy, which could possibly lead to weakened confidence in the euro as the single currency to evolving users’ expectations, including the need for innovative payment methods for businesses and the need to strengthen the international role of the euro.
For a digital euro to be used as the single currency, concurrently with euro banknotes and coins, it would require legislative changes in a form of a regulation that would be directly applicable in Member States. To this end, the Commission seeks stakeholder input on the following issues:
- Users’ needs and expectations for a digital euro: the Commission notes that the digital euro would be used for retail payments and akin to cash, it would be public money but in digital form. To this end, the Commission seeks views on various aspects of the digital euro and its relevant importance from the users’ perspective.
- The digital euro’s role for the EU’s retail payments and the digital economy: referring to its conclusions in the Retail Payments Strategy, the Commission notes that the EU’s retail payment market is still fragmented and is highly dependent on very few global players to provide payment solutions that work across border in the euro area, even though there are some new promising market initiatives. While the digitisation of the economy created new payment needs (including crypto-assets), the Commission would like to understand how the digital euro could fit into this evolving framework and provide value-add to the European digital economy. To this end, the Commission seeks stakeholder views on various features of the digital euro that would be relevant to support pan-European payments markets and to support development of the European digital economy.
- Making the digital euro available for retail use while continuing to safeguard the legal tender status of euro cash: noting that the digital euro would be another form of central bank money and as such, it could be given legal tender status. The Commission acknowledges that it would have implications on its distribution and acceptance (i.e. a payee cannot generally refuse a payment by a payer in digital euro and that the digital euro would have to be universally accessible). That said, while the concept of legal tender is enshrined in European law, it is not defined in detail. The Commission therefore seeks stakeholder views on regulating the status of legal tender in law, including any exceptions.
- The digital euro’s impact on the financial sector and the financial stability: noting that the digital euro will likely have an influence on financial intermediaries’ balance sheets, income statements, business model and services. The Commission seeks input on how financial intermediaries perceive the impact of the digital euro and how they could offer additional value depending on whether the digital euro is account based or bearer instrument/token based.
- Application of anti-money laundering and counter terrorist financing (AML-CFT) rules: accepting that while specific AML/CFT rules may need to be devised based on the exact design features of a digital euro, the Commission welcomes general views related to the implications of AML/CFT measures for intermediaries and an estimation of compliance benefits/costs.
- The privacy and data protection aspects: the Commission seeks views on specific features of the digital euro that could enhance the privacy and data protection of users therefore fostering public trust and confidence.
- International payments with a digital euro: the Commission seeks views on potential implications of the cross border use of the digital euro within or outside the EU, including in the context of specific use-cases and availability of the digital euro for EU citizens living outside of the Eurozone.
The deadline for stakeholder input is 14 June 2022.