EU firms up plans for introduction of digital euro
The European Union’s executive branch is set to propose a plan for a digital euro, mandating the ECB to establish usage regulations.
The European Union’s executive branch is preparing to introduce a plan for a digital euro. This plan, which is still in the draft stage, calls for the European Central Bank (ECB) to regulate the use of digital currency.
However, no specific limits for transactions or holdings have been proposed.
To maintain financial stability, the ECB is required to decide on the necessary tools. These tools should not prevent digital euro transactions that do not risk stability and should be applied uniformly in the euro area.
According to the draft proposal, there might be limits on the use of the digital euro as a store of value to ensure financial stability, credit availability, and monetary policy transmission.
Euro-area finance ministers will discuss the project at a meeting in Luxembourg.
The draft proposal also indicates that the digital euro will be recognized as legal tender and mandatory for acceptance, with exceptions for microenterprises and nonprofit organizations.
Acceptance of the digital euro will not be mandatory under certain temporary and legitimate conditions, for personal or household activities, or if other forms of payment have been agreed upon beforehand.
The digital euro is expected to be exchangeable for euro banknotes and coins at face value, and surcharges on debt repayments would be prohibited.
The ECB and the commission have clarified that digital currency will coexist with cash.
The ECB sees the digital euro as a way to meet the growing demand for electronic payments and to strengthen the euro area’s monetary sovereignty.
The central bank’s Governing Council will decide whether to proceed to the next phase in the fall, and the development process could take around three years.