Digital Euro: Brussels unveils its legal framework
The European Commission has just published draft legislation to govern its future central bank digital currency.
The digital euro is not yet in your pocket, or rather your digital wallet, but the project continues to move forward. On Wednesday, the European Commission published what amounts to the future legal framework for the project, which remains subject to validation by the European Central Bank (ECB). The institution chaired by Christine Lagarde will have to validate the official launch of the project in the autumn.
In the meantime, there is little doubt that the ECB wants to launch the digital euro project, which is not expected to be blockchain-based, especially in the face of the rise of the Chinese digital yuan and the emergence of numerous dollar stablecoins.
According to the document published by the Commission, the future digital euro, which the governor of the Banque de France calls "Cash+", will be compulsory within the 20 eurozone Member States. Only associations and companies with fewer than 10 employees (or with a balance sheet of less than €2 million) will be able to do without it, unless they already accept digital payments.
As far as private individuals are concerned, the choice will still be available to pay in cash or with digital euros. Brussels is ensuring that the two versions coexist and that one does not take precedence over the other.
In practical terms, the use of digital euros will be free of charge, will not be able to earn money - in the form of interest, and different payment providers will be able to distribute them. On the other hand, only banks will manage users' accounts.
The project should include safeguards, such as limits on the amount that individuals could hold, to avoid any major outflow of bank deposits. These could be between €3,000 and €4,000 per citizen, as the ECB has suggested. It will nevertheless be possible to make larger payments by connecting one's bank account.
As with Apple Pay, the system will be operational even when the smartphone has no Internet connection.
Smartphone manufacturers will also have to authorise its use via NFC (contactless payment) technology. It will be recalled that the EU filed a complaint against Apple over restrictions preventing other services from providing wallets in competition with Apple Pay...
All incoming and outgoing flows to and from the digital euro will be subject to a mechanism to combat money laundering and terrorist financing. In other words, the user's identity will have to be verified at the time.
This point may make privacy advocates wince, but cash is already subject to these mechanisms when you wish to withdraw cash from an ATM or teller.
Also on the subject of privacy, the European Commission has presented safeguards "to ensure that the ECB and national central banks cannot directly identify individual users of digital euros", nor track their payment habits. This is one of the most controversial points, as it theoretically allows commercial providers (who will supply a wallet) to do so.
Interestingly, the digital euro will not be limited to EU residents. Visitors and former residents will be able to access the digital currency, as will non-euro EU states and some foreign countries. However, these jurisdictions will need to seal agreements with the EU.