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Will the ECB Digital Euro Plan to Reduce Reliance on US Payment Systems Succeed?
This article was first published on The Bit Journal: What’s inside the plan for the ECB digital Euro, and will the project overcome existing legal obstacles?
The European Central Bank (ECB) will reportedly launch the ECB digital Euro sometime in 2029 if it succeeds in hammering out existing legal and logistical challenges. Officials working on the proposed central bank digital currency (CBDC) are currently laying the groundwork for the launch of the phase, which will conclude at the end of October 2025.
According to a Bloomberg report citing people close to the matter, officials at the European Central Bank are reviewing preparatory activities for the current phase of the ECB Digital Euro project as it nears its end. The ECB began its formal preparations for the proposed central bank digital currency in 2023, following an initial study that took 2 years.
Legal Challenges to be Ironed Out
Should the new CBDC project proceed to maturity, experts fear a new attempt to restrict financial freedom within the EU. The ECB Digital Euro initiative extends beyond simply updating existing payment systems. Pundits believe there is an underlying political objective to reduce reliance on non-European financial networks and private cryptocurrencies.
At the moment, the plan faces legal challenges, as national governments and the European Parliament have yet to agree on rules governing the issuance of the ECB Digital Euro. There’s fear among proponents of the central bank digital currency project that the European People’s Party’s preference for private firms to have a role may have slowed the legislative process.
Fear Surrounds the Influence of Stablecoins
This comes as policymakers express concern about the heavy reliance on US-based payment providers such as PayPal, Visa, and Mastercard, amid pressure to reduce dependence on foreign networks for daily retail payments. There are also concerns about the growth of dollar-backed stablecoins, including those supported by leading US political figures.
Most European Central Banks and regulators believe the potential spread of stablecoins could threaten regional payment autonomy and the proposed ECB Digital Euro. Officials at the European Central Bank argue that a central bank digital currency would offer users a publicly governed alternative for retail transactions, preserving the legal tender status of banknotes and coins.
Conclusion
While the European Central Bank has set a 2029 launch target for its proposed Digital Euro, the project faces several legal and logistical challenges. ECCB Executive Board Member Piero Cipollone had previously suggested mid-2029 as a realistic timeline, in line with current projections.
Still, progress in aligning legal frameworks remains the key indicator of whether the 2029 launch date target will be feasible. Additionally, the European Commercial Bank is still working on the details of a wholesale CBDC after approving the settlement of distributed ledger technology transactions using central bank money.
Glossary on Key Terms
CBDC: A digital form of a country’s fiat currency that is a direct liability of the central bank, which could be used for payments and complements physical cash rather than replacing it.
Digital Euro: A proposed digital form of central bank money issued and backed by the European Central Bank (similar to physical euro banknotes and coins).
ECB: European Central Bank, which is the central bank for the euro and the monetary authority for the Eurozone countries.
Frequently Asked Questions about the Digital Euro
What is the proposed Digital Euro?
This is a proposed digital form of central bank money, specifically, the euro, that could be used by the general public in much the same way as cash, but in virtual form.
When will it be introduced?
It has not yet been decided whether and when the digital euro will be introduced, but the ECB has given a 2029 target launch date.
What would payments using the Digital Euro look like?
The digital euro could be used in all manner of payment scenarios, including at the point of sale or online checkout, and offline in combination with payment cards.
How would a digital euro work?
The digital euro would be stored in an electronic wallet set up with your bank or a public intermediary. They would allow users to make all their usual electronic payments – in their local store, online, or to a friend – with their phone or card, online and offline.
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