Although a digital euro has yet to be decided upon, the ECB already believes that the CBDC should prioritize online payments and peer-to-peer transactions.
According the European Central Bank (ECB), the next digital euro should prioritize online and peer-to-peer payments. In a recent online post, the Eurosystem banking entity explained that other possible uses of the digital euro should take a backseat to efficient support of online transactions. Secondary functions of central bank digital currency (CBDC) may include tax payments, welfare payment receipts, and transactional payments.
Entitled “Digital Euro Implementation Approach”, the ECB publication offers a comprehensive and insightful look at the prospects for the digital euro. The online publication presents a timeline of CBDC development, from inception to proposed implementation and use cases. Furthermore, the document concludes by welcoming comments on the digital euro project amid ongoing developments.
According to the ECB’s digital euro team, the CBDC must possess multiple applications to address user needs and market gaps. The team also added that “in practical terms, a tiered approach would help ensure a smooth checkout experience for the end user.” In addition, the ECB’s digital euro unit explained that the aforementioned approach could also reduce complexities regarding implementation. The unit says that actions like trying to implement or implementing new systems at the same time should be easier.
Digital Euro to prioritize online payments and prevent banks from overcharging merchants
The recent online post emphasized that the use of e-commerce and payments between friends should be the first use case for CBDC. Meanwhile, ECB officials believe that consideration of decentralized finance (DeFi) applications with the digital euro should occur later. In addition, the ECB previously proposed that private use of the digital euro be free. However, the leading bank also added that there could be new laws that discourage banks from overcharging merchants.
The ECB is one of several global jurisdictions considering a ‘centralized’ digital currency issuance. Although the central bank of the European System does not expect an implementation in the short term, its approach towards a digital euro is already crystallizing. For example, amid ongoing technical evacuations, the ECB explained that the digital euro would not replace fiat currency. Instead, in a speech to the European Parliament committee last month, ECB executive board member Fabio Panetta explained:
“The digital euro would not replace other electronic payment methods, nor would it replace cash. Rather, it would complement them. And by doing so, it would safeguard our monetary sovereignty while strengthening Europe’s strategic autonomy.”
Panetta also mentioned online payments as the perfect use case for the digital euro. According to:
“Our priority for the digital euro project has always been clear: to preserve the role of central bank money in retail payments by offering an additional option to pay with public money, even where this is not possible today, for example in electronic commerce. .”
Postponement of the final vote on the EU MiCA legislation
The ECB’s development of the digital euro follows the EU’s postponement of the final vote on the Markets in Crypto Assets legislation. In January, reports indicated that the European Union was postponing its final vote on MiCA legislation for the second time in two months. The stated reason for the decision was a technical problem in the 400-page legal guidance document.
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Tolu is a Lagos-based blockchain and cryptocurrency enthusiast. He likes to demystify the crypto stories down to the basics so that anyone anywhere can understand them without too much prior knowledge. When he’s not up to his neck in crypto-stories, Tolu likes music, loves to sing, and is an avid movie buff.
