Payments using the digital euro could theoretically simplify digital transactions. Instead of banks settling complex transactions with vendors’ banks through third-party payment companies like Visa or Mastercard, digital euros would be sent directly from your digital wallet to the vendor’s. This process would resemble handing over cash, eliminating the need for banks or payment companies, though they would still be involved in the digital euro’s distribution.
In essence, the digital euro could challenge the private sector’s dominance over digital payments.
Where is the proposal at?
Currently delayed in Brussels, the digital euro is spearheaded by the ECB, but EU governments and the European Parliament must establish its legislative framework. This has introduced political complexities, as MEPs have raised concerns about potential government surveillance of people’s payments, a claim dismissed by the ECB.
The banking and financial sectors have labeled the digital euro project as “a solution looking for a problem,” fearing they’ll bear the costs of the necessary infrastructure. There are also concerns it could hinder future innovation by directing the EU’s payment industry.
Due to industry lobbying, Navarrete has described the digital euro as “a last resort” and “a nuclear threat” pressuring the industry to create a cross-border payment system before the legislation is finalized.
Will the ECB succeed?
Apart from the Parliament, the ECB needs to navigate through government officials in the Council of the EU, representing member countries, who aim to finalize their stance on the digital euro bill by year’s end. Their involvement is causing ECB concerns, particularly since the Council wants to decide how many digital euros a citizen can hold at one time to ease lenders’ fears of a bank run.
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