Brussels, September – In a bid to safeguard public funds and address the evolving landscape of digital transactions, the European Union’s financial services chief, Mairead McGuinness, has called for a measured and careful approach to the development of a digital euro. McGuinness emphasized the need for comprehensive examination rather than rushing the process, as the European Parliament elections scheduled for June next year approach.
The proposed draft law seeks to create a digital euro that mirrors the characteristics of physical cash, making it versatile and accessible even in offline scenarios. However, McGuinness stressed the importance of allowing the legislative process to proceed at its own pace, taking into account the customary slowdown in political activity preceding European Parliament elections. The goal is to ensure that the new European Commission, which will be appointed later in the year, can provide its full attention and scrutiny to this crucial piece of legislation.
The digital euro framework was initially proposed by the European Commission in June, setting the stage for a potential shift in the European financial landscape. However, the ultimate decision regarding the issuance of a digital euro rests with the European Central Bank (ECB). The ECB is slated to make a pivotal decision in October regarding the fate of the digital euro, a move intended to address the shortage of European payment service providers and adapt to the shifting preferences of consumers.
Mairead McGuinness expressed the need for urgency in exploring the concept of a digital euro. She emphasized that the use of physical cash has been on the decline as digital payment methods, including cards and smartphones, gain prominence. This shift towards e-commerce and cashless transactions has raised pertinent questions about the future of public money, particularly central bank-issued currency.
“Cash is declining in popularity. More and more, we are turning to cards and smartphones for our purchases, engaging in e-commerce transactions. If there comes a point where physical cash is no longer prevalent, we must consider: where will we store public money, the central bank’s funds, if not in cash? This underscores the imperative need for a digital counterpart to the traditional currency.” She firmly believes that the European Union has a duty to explore this avenue, ensuring that there are no gaps in the financial system.
McGuinness also emphasized the importance of providing consumers with choices. In this context, the European Commission has put forth concurrent measures that aim to guarantee the continued accessibility and usability of physical cash alongside the potential introduction of a digital euro.
One organization that welcomes the development of the digital euro is Positive Money Europe, a non-profit group dedicated to advocating for a “safe and accessible” form of public money. They argue that as cash becomes less widely accepted, individuals risk losing access to an anonymous payment method, resulting in greater reliance on payment service providers, which could lead to increased data sharing.
“As cash becomes increasingly obsolete in many places, individuals are finding themselves deprived of a confidential method of payment. This situation results in even greater sharing of personal data with payment service providers,” emphasized Positive Money Europe in a June report, underscoring the pressing need to tackle this concern.
The development of a digital euro raises several critical questions and challenges that need to be addressed during the examination process. These include concerns over digital security, privacy, and the potential implications for monetary policy. Additionally, ensuring the accessibility and usability of a digital euro for all citizens, including those in remote or underserved areas, is a paramount consideration.
As the European Union proceeds with the deliberation and examination of the digital euro, the financial landscape in Europe is poised for potential transformation. The outcome of the ECB’s decision in October will be closely watched, as it could mark a significant milestone in the evolution of European currencies and the broader financial services sector. In the meantime, stakeholders continue to stress the importance of thorough scrutiny and careful planning to ensure the success of this ambitious endeavor.