Brussels comes with plans for a digital euro

Up to €3000 in a secure online wallet, which can be used for both online and offline transactions. That’s the idea. More and more people pay with digital money, usually we are talking about crypto. Then the European Commission must be convinced that there is more to be said for crypto than just the fact that it is less or not regulated.

No crypto, but digital

Digital money has grown in popularity over the past few years. Despite sharp fluctuations in prices, a large part of the population still uses Bitcoin, for example. But where crypto uses specific technology, the digital euro will be more or less just digital money. The digital euro will be regulated by the European Central Bank after its introduction. That makes the digital euro a Central Bank Digital Currency or CBDC.

The digital euro must become usable throughout the eurozone. Different from “private money” but can be used with a debit card or via an app. The Commission considers it important to introduce its own digital currency because, according to them, there is a great demand for digital money with the security of a central bank. A greater degree of overview and stability should increase attractiveness. According to the committee, the digital euro will strengthen the eurozone and encourage competition and efficiency in the payment sector.

Research phase until October this year

The Commission sees plenty of opportunities, but there are also downsides. Possible disruption of the financial sector, large-scale speculation and the question of how the currency can be used abroad. However, the Commission is not yet drawing definitive conclusions as the study on the digital euro has not yet been completed. A preliminary report is already available.

The investigation has been running since October 2021 and should be completed in October of this year. The digital euro must be accessible, robust, secure and efficient. In addition, it must be examined how the currency performs against all relevant legislation. In any case, the Commission says that privacy will be guaranteed at all times. “Up to the highest level.” Once it has been mapped out how the digital euro should be designed and distributed and what the consequences will be for the market, the decision will be made regarding its actual introduction.

Alternative to credit card or Paypal

In practical terms, the plan should mainly smooth out the options in terms of payment options in Europe. A system like Ideal is, to be fair, ideal, but usually only usable in the Netherlands. Credit cards can be used internationally, but not every company works with them and the system works fundamentally different from the debit systems we know here. In addition, credit card companies often tend not to work in favor of the customer.

The more modern options, such as Paypall and ApplePay, like most credit card companies, are predominantly owned by American companies. Apart from the often predatory operation of the American financial markets, this also gives Americans a political advantage. For example, Teunis Brosens, an expert in digital currencies at ING, says that in theory it gives the US president the power to strip Europeans of a widely used payment method.

Facebook (they continue to stand their ground and call themselves Meta) has also been working on a digital currency for some time. The question is whether you trust a company that literally works to extract and resell personal data with your monetary wealth.

Concerns about privacy unfounded

As mentioned earlier, the absence of a central government was and is the great attraction of crypto. There are quite a few people who prefer not to have the government monitor their financial activities. Now the Tax and Customs Administration keeps an eye on almost every official transaction. But when the government itself starts facilitating transactions, there is a chance that undesirable situations will arise.

But we don’t have to worry about that in terms of privacy, the European Commission believes. According to them, the European Central Bank (ECB) has no access to payment data. The ECB will have no knowledge of who pays, to whom and for what. It is also not legally permitted for the ECB to determine what a digital euro can and cannot be used for. As long as it’s legal, you should be able to pay for it. For example, European governments cannot use the digital euro to discourage the purchase of cigarettes or alcohol.

Dutch Banking Association not yet convinced

Naturally, the commercial banks mainly see the dangers of a central competitor. The association (NVB) wants more clarity as soon as possible about the design and possible consequences of the digital euro. According to the NVB, its own role in distribution is also still very unclear. The NVB is strongly in favor of innovation and improvement of the European payment infrastructure, but believes that the current bill leaves too many questions unanswered.

The NVB would prefer to see more research being done. But if the digital euro really comes, the NVB wants a kind of small-scale test to be done first. An initial introduction with small amounts of values ​​should clarify the possible consequences.

The European Commission is frequently involved in developments in the digital field. For example, when it comes to regulating “AI”.