EU firms up plans for introduction of digital euro

The executive branch of the European Union is preparing to propose a plan for the introduction of a digital euro. Under this plan, the European Central Bank (ECB) will be tasked with establishing regulations governing the use of digital currency.

However, specific limits on transactions or holdings have not yet been put forward.

To ensure financial stability, the ECB will determine the necessary tools, aiming to allow digital euro transactions that do not pose risks to stability while applying regulations uniformly across the euro area. The draft proposal suggests the possibility of imposing limits on the use of the digital euro as a store of value in order to maintain financial stability, facilitate credit availability, and ensure the effectiveness of monetary policy transmission.

The project will be discussed by finance ministers from euro-area countries at a meeting in Luxembourg.

The draft proposal also states that the digital euro will be designated as legal tender and will be mandatory for acceptance, with exceptions for microenterprises and nonprofit organizations. However, acceptance of the digital euro will not be obligatory under certain temporary and legitimate circumstances, such as for personal or household activities, or if alternative payment methods have been agreed upon in advance.

The digital euro is expected to be exchangeable for physical euro banknotes and coins at their face value, and any additional charges on debt repayments would be prohibited.

Both the ECB and the European Commission have emphasized that digital currency will coexist with cash. The ECB views the digital euro as a means to meet the increasing demand for electronic payments and to enhance the monetary sovereignty of the euro area.

The Governing Council of the ECB will decide in the fall whether to proceed to the next phase, and the development process is estimated to take approximately three years.

source