2023-11-01 01:38:23
This is the second stage of the “digital euro” rocket, powered by the European Central Bank. After two years of investigation, the preparatory phase for the potential arrival of this cash lining opens this Wednesday, November 1st. On the program: finalization of the drafting of the rules, tests and experiments. “We must prepare our currency for the future,” explained Christine Lagarde, president of the European Central Bank (ECB), in mid-October, to justify the continuation of this project which could, in the long term, disrupt our daily lives. But which remains, for the moment, an unidentified payment object.
Why create a digital currency?
For public authorities, this “digital form of cash” would compensate for the inevitable decline of cash, which last year only represented 42% of transactions in value in the euro zone. Above all, it would make it possible to assert Europe’s independence from non-European payment players such as the American Visa or MasterCard networks, to guard against potential competition from cryptocurrencies or even the emergence of virtual currencies carried by tech giants like Libra, imagined by Facebook and finally abandoned last year.
“A digital euro would strengthen the efficiency of European payments and contribute to Europe’s strategic autonomy,” summarized Fabio Panetta, member of the ECB executive board. The institution is not the only one to put a note on digital currency to preserve its monetary sovereignty since, according to a survey by the Bank for International Settlements (BIS), 24 central banks in the world should have launched a digital version of their currency by 2030.
What would the digital euro look like?
The digital euro would not be intended to replace cash. Alongside fiat money (coins and notes) and scriptural money (on bank accounts, usable by card, checks, etc.) would therefore be added digital currency, issued by the central bank.
Individuals would carry out transactions via a banking application, a “wallet” from their payment service provider or a dedicated application created by the Eurosystem, which brings together the central banks of the euro zone, usable online or offline. A digital euro payment card could even be provided to “people who do not have access to a bank account or digital tools”, specifies the ECB.
What is the benefit for consumers?
This would therefore be an additional means of payment. It would be usable by everyone, free of charge and accepted everywhere, to pay at a physical point of sale or on the Internet and between individuals. But will they benefit from it? Because for the general public, it is difficult at first glance to differentiate between a digital euro payment and a card payment. Except that the first is issued and guaranteed by the ECB while the second is private money, issued by commercial banks.
Above all, some are concerned about the confidentiality of exchanges while cash allows payments to be preserved anonymity. “We are working to protect privacy but since digital money leaves a trace on the blockchain, it will not be entirely anonymous as is the case with a bank note,” Christine Lagarde underlined last month, in front of Members of the Economic and Monetary Affairs Committee of the European Parliament.
Why are banks reluctant?
On the banks’ side, there are fears of a reduction in bank deposits from individuals, who are more inclined to store them in their wallets in digital euros, thus causing a weakening of the banking system. To avoid this risk, the ECB could cap the total amount of assets at 3,000 digital euros per person. Much too high according to the French Banking Federation (FBF). “Do you have 3,000 euros in coins and notes in your pocket? pretended to question Nicolas Namias, its president, in an interview with Echoes end of September. Probably not. Any digital euro cap of 3,000 euros would reduce our ability to lend. »
“This project also raises important questions of competition between the public and private sectors, particularly with regard to the development of the European Payments initiative,” confides the European Banking Federation. Sixteen European banking groups and service providers, including six French banks, are involved in this project which aims to develop a payment solution by instant transfer from account to account now called Wero.
All this will not be decided before 2025 and the adoption of the appropriate legislative framework by the European Parliament and the Council. It will then be up to the ECB to make the decision whether or not to launch the digital euro. If this were the case, it would not see the light of day before 2027.
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