The ECB hopes the digital euro will reduce the European Union’s reliance on Visa and Mastercard.
MILAN – The European Union has begun final negotiations on the rules governing the digital euro, an electronic version of the euro, with the legislation expected to pave the way for formal approval by the European Central Bank (ECB) in early 2027.
According to Reuters, negotiations involving the European Parliament, EU member states and the European Commission have entered their final stage. If discussions proceed as planned, the ECB is expected to give formal approval on 1 January 2027.
The digital euro is expected to be launched in 2029 following a pilot programme scheduled to begin next year, involving around 40 banks and payment service providers.
The digital euro will be an electronic form of cash issued directly by the ECB. However, the central bank has stressed that physical cash will continue to circulate as its use declines alongside the growing adoption of digital payments.
The ECB believes the digital euro will strengthen confidence in the financial system by providing the public with the only digital form of central bank money.
Its introduction is also expected to reduce the European Union’s dependence on US-based payment providers such as Visa, Mastercard and PayPal.
The ECB has argued that the growing use of stablecoins could threaten financial stability by reducing bank deposits.
Under the proposal, consumers will be able to use the digital euro free of charge through a dedicated application, mobile banking services or payment cards for users without smartphones.
Merchants will generally be required to accept payments in digital euros because it will have legal tender status.
Meanwhile, fees that banks and payment service providers may charge merchants will be capped under the new regulations.
Banks, however, have called for compensation to cover the costs of developing the systems required to support digital euro transactions.
As part of the project, the ECB is also preparing payment infrastructure and technical standards that will be provided free of charge to banks.
To safeguard banking sector stability, the amount of digital euros that individuals can hold will be capped. One proposal under discussion would limit holdings to EUR 3,000 per person.
In addition, the digital euro will not pay interest in order to discourage consumers from shifting deposits out of bank accounts into the digital currency.
On privacy, the ECB said it would not be able to view users’ transaction details. For payments made through banking applications, payment data will remain accessible to banks, as with other digital transactions.
Offline transactions, meanwhile, will not store payment details and will record only changes in users’ account balances. (ARF/ZH)
as a preferred source on Google