The European Commission will work with the European Central Bank (ECB) to examine potential challenges in issuing the euro digitally. The collaboration targets to open the door to wealth development later this year.
The two institutions joint statement suggests that the focus is on reviewing various political, legal, and technical issues related to the possibility of a digital euro. The currency will complement private sector money and payment solutions. Besides, the two EU institutions recognize that the spread of the digital euro can face political obstacles.
Privacy Remains Major Concern
Before announcing the partnership, the ECB completed a public consultation on the digital euro; talks began on 12 October 2020 with over 8,000 responses.
The multitude of responses to the survey indicates that European citizens, businesses, and scientists are passionate about shaping a digital euro‘s vision. All stakeholders’ views are critical to them as they assess the need, feasibility, risks, and benefits of the digital euro.
Although the ECB will publish the feedback later, the report suggests that confidentiality is a significant concern. Another essential matter concerns the security and impact of pan-European assets.
ECB President Christine Lagarde has indicated that the digital euro will be introduced in previous engagements in the next five years. At the same time, Lagarde has criticized Bitcoin, describing it as a highly speculative asset that causes money laundering crimes; therefore, she asked for further provisions.
Digital Currency in the European Central Bank
The digital currency supported by the ECB will enhance traditional banking systems such as P2P transactions and machine-to-machine transactions and better managed exchange rate and interest rate risk thanks to the programmable cryptocurrency features.
The introduction of the digital euro has been under discussion for almost two years. Still, the bloc nations and associated regulators are no longer introducing a single cryptocurrency for their citizens. The European Central Bank has announced that it will start an investigation phase to decide whether plans to issue the digital euro should continue for less than a year or ignore it.
In September, the European Commission published the EUs legal framework for cryptocurrencies, which is part of a broader digital finance policy initiative. The proposal proposes a unique legislative system for the cryptocurrency market and associated service providers not covered elsewhere in the EU financial services regime.
Recently, the German finance minister has rejected privately issued digital currencies such as Facebook‘s Libra and JPMorgan Coin. Berlin previously said it would cooperate with its European and international allies to prevent cryptocurrencies’ conversion into alternative currencies.
