Digital euro package [EU Legislation in Progress]

Written by Martin Höflmayr (1st edition).

A digital euro can be understood as central bank money offered in digital form for citizens and businesses to be used for their retail payments. It would be a central bank digital currency (CBDC) –an electronic equivalent to cash, complementing banknotes and coins – and the central motivation to develop a CBDC can be explained by the increasing digitalisation of financial services. Banknotes and coins, currently the only public money, are considered the ultimate anchor of the financial system. However, in recent years the number of cash payment transactions has declined substantially while digital payments have soared. At the same time, private currencies, such as Bitcoin, are challenging the role of sovereign currencies. Another argument for pursuing a digital euro relates to Europe’s ‘strategic autonomy’ and the external dependency on foreign payment-related service providers.

In October 2021, the ECB launched the investigation phase for the digital euro project. It is the ECB’s prerogative to decide whether or not to issue a digital euro, but the decision requires the approval of a regulation establishing a legal framework for a digital euro. The European Commission has therefore put forward a digital euro package. While the proposal would grant legal tender status to the digital euro, the legal tender status of the physical form of central bank money would also be ensured for the first time in secondary legislation.

Versions

• September 2023: Digital euro package (1st edition)