The proposed legislation is announced to lay down the digital euro principles prior to being debated and will be amended by the European Parliament and European Council, if necessary. The legislation is believed to be a necessary step when it comes to the issuance of a digital euro by the European Central Bank (ECB), and it will address key issues that have been identified during a targeted public consultation by the European Commission. Some of the issues that will be addressed, as confirmed by EU commissioner Mairead McGuinness are ‘the risk of disintermediation of banks and financial stability risks’, and whether ‘the digital euro should be granted legal tender status – like euro cash or not’.
First news of the European Commission’s plans to table digital euro legislation in early 2023 were made public in February 2022.
In July 2021, the ECB launched a two-year investigation phase of the digital euro project. The investigation phase is aimed at identifying an optimal design for the digital euro and ensure that it meets users’ needs. The central bank is also aiming to analyse how front-end services that build on a digital euro could be provided by financial intermediaries. The investigation phase is set to end in October 2023, with the Governing Council deciding whether they will be moving towards the next phase, in which the ECB aspires to see the development of integrated services, as well as carry out digital euro testing and live experimentation.
In September 2022, the ECB announced that they are to trial five prototype digital payment solutions, aimed at testing the way in which front-end user interfaces and back-end infrastructure can be integrated so that users are enabled to make peer-to-peer, point-of-sale, and ecommerce payments with the proposed Central Bank Digital Currency. The prototype solutions that the ECB is to test have been developed in partnership with the European Payments Initiative (EPI), CaixaBank, payment services providers Worldline and Nexi, and Amazon, and will simulate the steps needed to be taken by users to complete digital euro transactions.
CaixaBank’s focus will be on online peer-to-peer payments;
Wordline’s focus will be on offline peer-to-peer payments;
EPI’s focus will be on point-of-sale payments initiated by the payer;
Amazon’s focus will be on ecommerce payments.
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