By
Godfrey Benjamin
April 26th, 2024
The potential issuance of fiat currency in digital form has garnered global attention, with various jurisdictions exploring the concept. The EU, the US, and the UK are among those actively considering the implementation of a CBDC.
A leaked draft of the proposed Digital Euro Bill, set to be proposed by the European Commission on June 28, reveals several significant provisions that aim to shape the future of the Central Bank Digital Currency (CBDC).
The draft bill, seen by CoinDesk, highlights key elements such as the ban on interest and surcharges, offline payment availability from the onset, and limitations on programmability. Notably, the draft bill affirms the digital Euro’s status as legal tender, placing it on equal footing with traditional fiat currencies. This recognition ensures that shops and businesses must accept the digital euro as a valid means of payment.
According to the text viewed by CoinDesk, the EU intends to make the digital Euro available for both online and offline transactions right from its initial issuance. The regulation aims to ensure a level of privacy equal to taking cash from an ATM during offline, face-to-face interactions.
Notably, privacy has emerged as a significant area of public concern surrounding CBDCs, as highlighted by a 2021 survey conducted by the European Central Bank (ECB). The leaked draft of the proposed Digital Euro bill, therefore, acknowledges these concerns and aims to address them proactively.
While privacy is paramount, the leaked draft acknowledges the importance of regulatory monitoring in combating financial crimes such as money laundering. According to the proposed bill, neither the ECB nor the payment service providers will have access to personal transaction data.
Also, in an effort to uphold the essence of fiat currency and maintain its freely usable nature, the draft law emphasizes that the CBDC “shall not be programmable” The inclusion of this provision underscores the commitment to preserving the essential attributes of fiat currency.
Additionally, the draft law incorporates provisions to discourage individuals from utilizing digital euro accounts as a substitute for traditional commercial bank savings accounts. These measures aim to ensure that digital euro holdings do not bear interest and allow for additional controls to be imposed by the ECB.
To encourage the primary use of the digital euro for everyday transactions, ECB Executive Board member Fabio Panetta has suggested a cap of approximately 3,000 euros ($3,250) on individual holdings.
Digital Euro: Navigating Lawmakers’ Skepticism
The potential issuance of fiat currency in digital form has garnered global attention, with various jurisdictions exploring the concept. The EU, the US, and the UK are among those actively considering the implementation of a CBDC.
Remarkably, the ECB has conducted a detailed assessment of a CBDC, and a decision on its adoption is likely later this year. Fabio Panetta emphasizes that the decision to proceed with a CBDC should be a political one, involving not only central bankers but also political considerations.
Overall, the introduction of a CBDC in the EU necessitates legislation that must be approved by both the European Parliament and the EU Council. However, members of the European Parliament have raised reservations about the CBDC, and the Council appears unlikely to completely reject the initiative.
While speaking anonymously on the issue, a senior EU official has indicated that the Council will not formulate a joint opinion on the digital euro in the near future.