The European Central Bank Begins Preparations for Digital Euro
ECB Launches Project for Digital Euro
The European Central Bank (ECB) has embarked on a two-year project to introduce the “digital euro.” This initiative follows a comprehensive exploration period of two years and will enter the preparation phase in November. The decision to progress with the digital euro aligns with the actions taken by more than 100 global central banks in response to the decline in cash usage and the increasing popularity of cryptocurrencies.
Benefits and Features of the Digital Euro
Under the leadership of President Christine Lagarde, the ECB’s governing council will ultimately decide on the issuance and implementation of the digital euro after the two-year phase. The digital currency aims to facilitate all digital transactions within the euro area, providing comprehensive payment services for person-to-person, point of sale, e-commerce, and government transactions. It also emphasizes privacy, financial inclusion, and environmental sustainability.
The digital euro will coexist with physical cash and be held in a digital wallet. It will serve as a cost-free option for all digital payments while adhering to the highest privacy standards. The ECB views the digital euro as a secure alternative to volatile cryptocurrencies like Bitcoin and as a pan-European solution to counter the dominance of foreign payment giants such as MasterCard, Visa, and PayPal.
Addressing Concerns and Ensuring Sovereignty
While critics express concerns about customers shifting funds to digital euro accounts, proponents argue that it will safeguard payment “sovereignty” within the eurozone and prevent dominance by non-European tech companies or private non-EU entities.
Global Shift Towards Central Bank Digital Currencies
Several countries, including China, India, and Nigeria, have already embraced central bank digital currencies (CBDCs). The U.S. Federal Reserve is also contemplating a similar initiative. Access to these services would be facilitated through payment-service provider apps or apps provided by the Eurosystem.
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