Fabio Panetta, a member of the Executive Committee of the European Central Bank (ECB), recently announced that the European Commission would be presenting a legislative proposal for the digital euro in June. He further stated that the next steps would be decided in October.
Digital Euro Regulatory Framework In Progress
In an interview with the ECB’s official site, Panetta confirmed that the eurozone bank is in regular contact with the European Commission to establish a regulatory framework for the digital euro. The digital euro is set to become the official central bank digital currency (CBDC) for the 27 countries in the European Union.
Panetta stated, “We are studying the design of the digital euro, its distribution, and its impact on the financial sector.” He also mentioned that the proposal expected to be presented in June would receive a response from the Governing Council of the ECB in October.
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The Governing Council will then decide whether to initiate a preparation phase to develop and test the digital euro. According to Panetta, the European CBDC testing phase could last two to three years.
If everything progresses smoothly and both the Governing Council of the ECB and the legislators of the European Parliament approve the proposal, the digital euro could be launched in approximately three to four years, estimated Panetta.
Will The Digital Euro Receive Significant Adoption?
During the interview, Panetta was asked about the benefits and potential risks of using the digital euro. In response, he emphasized the need to provide citizens with a risk-free digital means of payment that can be used freely throughout the euro area.
Panetta highlighted that such a solution currently does not exist, pointing out that the card payment market is dominated by non-European companies, specifically referring to Visa and Mastercard. He stated that this situation would be unthinkable in the United States and expressed concern about companies selling users’ personal data.
Panetta also emphasized the importance of central bank money remaining at the financial system’s core. The increasing adoption of cryptocurrencies like Bitcoin (BTC) raises concerns for entities like the ECB.
Addressing concerns about privacy, Panetta clarified that the ECB would not have access to personal data. Financial intermediaries will handle the distribution of the digital euro, and a balance must be found between ensuring confidentiality and combating money laundering and terrorist financing. Panetta noted that the responsibility of finding this balance lies with the legislators.
CBDCs On The Rise
Central Bank Digital Currencies (CBDCs) are indeed on the rise as countries worldwide explore the potential of digital currencies issued and regulated by central banks. Countries like the Bahamas and Nigeria have already launched their digital currencies, while China and Japan are in advanced pilot stages.
-Featured image from iStock.com, chart from Tradingview.com