Central bankers are scheduled to begin testing the digital euro this year, which has prompted EU finance ministers to demand that it offer both transparency and privacy.
The idea of a digital euro had first been introduced back in October 2020 and the European Central Bank (ECB) is spearheading its development.
In 2021, the ECB launched a more formal ‘investigation’ into a central bank digital currency (CBDC) for the European Union (EU).
Since then, there have been regular discussions on this topic by the Eurogroup that includes finance ministers of countries that are members of the EU and use the common currency.
Members of the Eurogroup had a meeting recently and a statement was issued after it in which they highlighted their priorities with respect to the digital euro if the ECB decides to take it forward.
EU legislation would determine whether a digital euro is actually issued or not. The members highlighted that the bloc’s economy would benefit from the introduction of a central bank digital currency (CBDC).
They said that it would provide a number of benefits to businesses as well as citizens. The statement said that it would also ensure that the European Central Bank (ECB) remains in control of the monetary system.
Nonetheless, there are still a number of decisions that have to be taken regarding what the digital euro will be like.
The latest statement from the Eurogroup underscored a prominent issue between anti-crime measures and user privacy.
It said that the digital euro will only be able to succeed if it is able to maintain and ensure the trust of users and this means respecting the fundamental right to privacy.
The statement also said that other policy objectives should also be taken into account for the design of the digital euro, such as ensuring compliance with sanctions and preventing tax evasion, illicit financing, and money laundering.
It was suggested that more privacy should be offered to users who are engaging in ‘less risky’ transactions.
The most recent discussions on the digital euro had also raised other issues, such as the impact of the CBDC on the environment.
In addition, there was also talk about the digital euro complementing cash rather than replacing it altogether.
Apart from that, there were also talks about features that would help improve the competitiveness of the digital euro with traditional online banking.
It said that an offline function could be explored and payments could also be programmed to be fulfilled when specific conditions are met.
According to the European Commission, they will bring forward a proposal for establishing the digital euro and regulating its main features in the first half of this year.
Meanwhile, a prototyping exercise is in progress by the European Central Bank (ECB) for the digital euro. The exercise would include five companies, which are Amazon, Nexi, EPI, Worldline, and CaixaBank.
Each of these companies is focusing on a particular use case of the digital euro.