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European Commission Publishes Digital Euro Framework,


European Commission Publishes Digital Euro Framework
Image source: iStock

BRUSSELS, BE – The European Commission has published its legislative plans to introduce a digital euro, which aims to facilitate free digital payments for Europeans throughout the currency zone. The proposed central bank digital currency (CBDC), as outlined by Valdis Dombrovskis, the commission's Executive Vice President, brings strategic advantages to enhance the integrity, safety, and innovation of the European payment system.


To address concerns about privacy and financial stability, the legislative plans include safeguards. The digital euro aims to provide a level of privacy equivalent to cash transactions while maintaining high data protection standards. This aspect ensures that payments can be made between friends and acquaintances securely, promoting trust and the integrity of the digital currency system. Moreover, the CBDC could offer an alternative means of payment in remote rural areas, where access to traditional banking services may be limited.


Despite the European Commission's push for a digital euro, skepticism remains among various stakeholders, including lawmakers, governments, and commercial banks. Lawmakers and governments are questioning the added value of a CBDC, while commercial banks perceive it as potential competition for their own digital payments systems and savings accounts.


To address concerns and gain wider acceptance, proponents of the digital euro argue that clear limits on holdings and transactions will prevent excessive capital flight from commercial banks. By emphasizing the advantages of a digital euro, such as its potential use in remote areas and its enhanced privacy features, the European Commission aims to engage skeptics in a more meaningful dialogue.


The legislative proposals set forth by the European Commission do not directly bring the digital euro into existence, as the final decision lies with the European Central Bank (ECB). The ECB has welcomed the plans and intends to decide in the coming months whether to proceed to the next phase of the project. ECB President Christine Lagarde highlights the significance of a digital euro in ensuring that the European currency remains relevant in the digital age.


The proposed legal framework aims to enable the use of the digital euro offline, providing a level of privacy comparable to cash transactions. It explicitly prohibits the CBDC from being programmed to limit the goods it can purchase. However, it does acknowledge the potential for conditional payments, such as monthly utility bills or more complex smart contracts.

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