EU Publishes Digital Euro Bill Featuring Privacy Controls, Offline Guarantee

Officials want a digital payment system available to “everyone, everywhere, for free.”

AccessTimeIconJun 28, 2023 at 10:29 a.m. UTC
Updated Jun 29, 2023 at 10:05 a.m. UTC

BRUSSELS, Belgium – The European Commission published its legislative plans to underpin a digital euro on Wednesday, saying it would ensure Europeans can pay digitally for free across the currency zone.

The text, a version of which was seen by CoinDesk two weeks ago, includes safeguards for privacy and financial stability, but many stakeholders are already questioning the benefits of the potential new central bank digital currency (CBDC).

In a Wednesday posting on the EU executive’s website, the commission’s Executive Vice President Valdis Dombrovskis argued the CBDC brought “strategic advantages.”

“A digital euro would also enhance the integrity and safety of the European payment system at a time when growing geopolitical tensions make us more vulnerable to attacks to our critical infrastructure,” be available “to everyone, everywhere, for free,” and could stimulate innovation and competition in a market dominated by a few major players, mostly from the U.S., said Dombrovskis in the post co-authored with European Central Bank’s (ECB) Executive Board Member Fabio Panetta.

At a Wednesday press conference to present the plans, European Commissioner Mairead McGuinness said she expected the debate over a digital euro to continue and intensify – but added she hoped the extra potential options a digital euro brings, such as its use in remote rural areas, could persuade skeptics.

“Somebody falling in love with digital currency is stretching it,” said McGuinness, the commission’s most senior financial services official, pulling a wad of banknotes out of her pocket. “It's easier to talk about cash because it's tangible.”

The law doesn’t bring the digital euro into being as such – since it’s the ECB that needs to decide whether to issue the CBDC. Officials argue the state-backed digital currency offers features private payment means aren’t always able to – allowing payments between friends and with higher data protection standards.

Yet despite years of technical work by the central bank, many remain nonplussed – including some of the lawmakers and governments who’d need to approve the commission’s new bill.

The initiative has also faced skepticism from commercial banks, for whom the state-backed currency represents competition to their own digital payments system, and potentially an alternative to savings accounts too.

“Alongside the main features of a digital euro, it is important to discuss the broader questions about its added value,” said Wim Mijs, chief executive officer of lobbying organization the European Banking Federation in a statement, arguing the digital euro would need firm limits on holdings and transactions to prevent deposits fleeing from banks.

In a statement published Wednesday, the ECB welcomed the commission's plans and confirmed it will decide in the fall whether to move to the next phase of its project.

“The euro is the most tangible symbol of European integration,” said ECB President Christine Lagarde in a statement to the press. "We look forward to continuing working together with other EU institutions towards a digital euro to ensure our currency is fit for the digital age.”

The legal proposals seek to ensure the digital euro can be used offline, offering a level of privacy equivalent to that of cash. It forbids the CBDC from being “programmed” to limit the goods it can be used to buy, though officials say it could still be used to underpin conditional payments, such as a monthly payment for a utilities bill, or a more complex smart contract.

UPDATE (June 28, 11:15 UTC): Adds quotes from Commissioner Mairead McGuinness, and from the ECB.

CORRECTION (June 29, 10:05 UTC): Corrects name of European Banking Federation.

Edited by Sandali Handagama.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.