Europeans will have to wait between 2027 and 2030 to use the digital euro

ECB executive advisor Fabio Panetta, who oversaw the work, assured in May that the digital euro could be launched in “three or four years” from October. However, sources think that the deadlines may be a little longer unless there is a development that requires speeding up the process. Juan Ayuso, chief operating officer of the Bank of Spain, hinted at this at the Cunef conference in July: “In October, predictably, a new phase will open, which will be called preparation. There is no standard for how long this will last. for reference, in recent processes of this magnitude the preparatory phases took five and a half years and six and a half years“.

The ECB started its work at the end of 2019 and the investigation phase, which started in July 2021, ended in October. At the same time, the European Commission presented a legislative proposal on the legal framework for the digital euro last June. It is discussed by the Council and the European Parliament. The final decision on the creation of the currency will be made by the European Central Bank, but this decision will not be made until the legal framework in question is approved. “The decision to issue a digital euro has not yet been taken and will not be in the short or medium term.“Ayuso warned.

payment anchor

What is slowness? To explain this, it is necessary to understand that the only money whose value is currently guaranteed by the central bank is physical: Euro coins and banknotes. The money that citizens have in banks is private money, but the important thing is that It can be converted into public money by withdrawing cash at any time.. Public money is therefore known as monetary anchor (companies accept card payments because they know they can convert them into equivalent amounts of public money). This makes it easier for public money to fulfill its role as a unit of account (for setting prices in euros). “Payments are towards the economy electric to a house“Nothing can be done if the electricity goes out,” Ayuso said.

The rise in digital payments accelerated by the pandemic explains why central banks are considering creating digital currencies to continue acting as monetary anchors. About Digitally replicate the role cash plays today To ensure the financial stability, prices, operational guarantee and strategic autonomy of the European payment system. This is why most payment companies are foreign (like Visa, Mastercard or Paypal), which poses a risk if their country imposes sanctions on Europe. At the same time, in addition to reducing the risk of market abuse, Secure solution against volatile crypto assets or in case of operational problems of payment companies or network interruptions (payments can also be made without connecting to the Internet). Moreover, if other countries create their own digital currencies and the eurozone does not, the euro may lose its international validity.

Advantages and risks

So what will it do for Europeans? Brussels proposed that the digital euro be free for citizens, mandatory adoption by physical and digital businesses (except very small ones), and mandatory distribution by banks. Spain has one of the largest and most advanced payment ecosystems on the continentbut this is not the case in other Eurozone countries, which would benefit. Also, since there is no European digital payment method that is universally accepted across the euro area, transfers between countries or payments abroad will be guaranteed. Similarly, financial participation will be preferred as people who do not have access to a bank account can also make digital payments. A presentation is also expected. Digital financial innovation with products and services spanning the entire euro area.

Then why this slowness? The impact of the project is so much that numerous technical and operational questions need to be resolved, such as the way to guarantee the security and privacy of payments, the technology to be used, or whether the ECB will create its own virtual wallet. use apps or use banks’ apps. An important point is that you want Preventing citizens from taking their money from banks to the central bank en masse. To make loans, organizations must hold deposits, so if they don’t have deposits they won’t be able to finance the economy, and Liquidity and solvency at risk. In addition, the reflection of the ECB’s interest rate hikes on loan and deposit rates will make the fight against inflation more difficult. For this reason, it is being worked on that digital euros have a maximum limit of virtual wallets (3,000 euros are mentioned), but the largest payments can be made as these wallets will be linked to bank accounts.