European Central Bank (ECB) executive board member Piero Cipollone recently addressed the European Parliament Committee on Economic and Monetary Affairs to discuss the preparations for the launch of a digital euro. During his speech, Cipollone highlighted four key issues that the central bank is currently facing and outlined how the ECB plans to ensure that the public can use the digital euro as a free common means of payment.
Cipollone revealed that the ECB has already begun searching for infrastructure providers for the digital euro, emphasizing the importance of being prepared ahead of the decision to launch. He stated that agreements with these providers would be flexible to accommodate any changes in legislation or technology. Notably, this decision could have significant implications for Amazon’s involvement in the project, as the company was initially chosen to develop a prototype e-commerce component for the digital euro, but a new call for applicants has since been issued.
The second issue discussed by Cipollone was the creation of a digital euro rulebook, which would establish a standardized set of rules, standards, and procedures for the digital currency. The aim is for the digital euro to function similarly to physical cash, freeing users from relying on international payment processors and ensuring equal access to the currency across the eurozone. Cipollone likened the digital euro infrastructure to train rails, suggesting that it would be accessible to various private companies while still belonging to the state.
In a recent paper published by the European Money and Financial Forum, concerns were raised about the legal implications of making the digital euro a legal tender. The paper highlighted potential legal issues surrounding the status of private payment providers integrated into the euro system, referring to the concept of legal tender as a “barbarous archaism.”
To maintain financial stability, safeguards are being incorporated into the design of the digital euro. Cipollone explained that the digital currency would be interest-free to avoid competition with savings institutions. There would also be limitations on the amount of public digital euro that individuals can hold, as well as restrictions on businesses and financial institutions holding the currency. Additionally, a solution would be provided to link CBDC wallets with bank accounts, allowing transactions to be carried out without the need for pre-funding the wallets.
Addressing concerns about privacy, Cipollone assured that cash would still be retained, and offline digital euro payments would offer the same level of privacy as physical cash, with only the payer and payee having access to transaction details. Online transactions would require the ECB to receive a minimal amount of pseudonymized data for settlement purposes, and users would have greater control over their personal information compared to existing private payment systems. The digital euro would also prioritize state-of-the-art cybersecurity measures.
In conclusion, the ECB is actively working on the preparations for the issuance of a digital euro. Cipollone’s address to the European Parliament Committee shed light on the key issues being addressed, including the search for infrastructure providers, the establishment of a digital euro rulebook, the incorporation of safeguards to maintain financial stability, and the assurance of privacy and cybersecurity measures. These developments hold significant implications for the future of digital payments in the eurozone.