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Proposal for a |
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL |
on the establishment of the digital euro |
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, |
Having regard to the Treaty on the Functioning of the European Union, and in particular |
Article 133 thereof, |
Having regard to the proposal from the European Commission, |
After transmission of the draft legislative act to the national parliaments, |
Having regard to the opinion of the European Central Bank18, |
Having regard to the opinion of the European Economic and Social Committee19, |
Acting in accordance with the ordinary legislative procedure, |
Whereas: |
(1) |
The Commission emphasised in the Digital Finance and Retail Payment Strategies20 of |
September 2020 that a digital euro, as a retail central bank digital currency, would act |
as a catalyst for innovation in payments, finance and commerce in the context of |
ongoing efforts to reduce the fragmentation of the Union retail payments market. The |
Eurosummit of March 2021 called for a stronger and more innovative digital finance |
sector and more efficient and resilient payment systems. The Eurogroup also |
acknowledged, in its statement of 25 February, the potential of a digital euro to foster |
innovation in the financial system. In that context, both the European Parliament21 and |
ECOFIN Council22 welcomed in February and March 2022 the European Central |
Bank’s decision to launch a two-year investigation phase of a digital euro project, |
starting from October 2021. |
(2) |
On 2 October 2020, the European Central Bank published its “Report on a digital |
euro”23. The report formed the basis for seeking views on the benefits and challenges |
of issuing a digital euro and on its possible design. |
(3) |
Central bank money in the form of banknotes and coins cannot be used for online |
payments. Today, online payments rely entirely on commercial bank money. The |
acceptability and fungibility of commercial bank money rely on its convertibility on a |
one-to-one basis to central bank money with legal tender, which serves as a monetary |
anchor. That monetary anchor is at the core of the functioning of monetary and |
financial systems. It underpins users’ confidence in commercial bank money and in |
the euro as a currency and is therefore essential to safeguard the stability of the |
monetary system in a digitalised economy and society. As central bank money in |
physical form alone cannot address the needs of a rapidly digitalising economy, this |
could gradually remove the monetary anchor for commercial bank money. It is |
therefore necessary to introduce a new form of official currency with legal tender |
which is risk free and helps visualise the convertibility at par of the money issued by |
various commercial banks. |
(4) |
To address the need of a rapidly digitalising economy, the digital euro should support |
a variety of use cases of retail payments. Those use case include person to person, |
person to business, person to government, business to person, business to business, |
business to government, government to person, government to business, and |
government to government payments. In addition, the digital euro should also be able |
to fulfil future payments needs, and in particular machine to machine payment in the |
context of Industry 4.0 and payments in the decentralised internet (web3). The digital |
euro should not cater for payments between financial intermediaries, payment service |
providers and other market participants (that is to say wholesale payments), for which |
settlement systems in central bank money exist and where the use of different |
technologies is being further investigated by the Eurosystem. |
(5) |
In a context where cash alone cannot answer the needs of a digitalised economy, it is |
essential to support financial inclusion by ensuring universal, affordable and easy |
access to the digital euro to individuals in the euro area, as well as its wide acceptance |
in payments. Financial exclusion in the digitalised economy may increase as private |
digital means of payments may not specifically cater for vulnerable groups of the |
society or may not be suitable in some rural or remote areas without a (stable) |
communication network. According to the World Bank and the Bank for International |
Settlements, “efficient, accessible and safe retail payment systems and services are |
critical for greater financial inclusion”.24 That finding was further substantiated by the |
study on new Digital Payment Methods commissioned by the European Central Bank, |
which concluded that for the unbanked/underbanked/offline population, the most |
important features of a new payment method are easiness of use, not requiring |
technological skills, and to be secure and free of charge.25 A digital euro would offer a |
public alternative to private digital means of payments and support financial inclusion |
as it would be designed along these objectives, thus catering for free access, easiness |
of use and wide accessibility and acceptance. |
(6) |
The digital euro should complement euro banknotes and coins and should not replace |
the physical forms of the single currency. As legal tender instruments, both cash and |
digital euro are equally important. Regulation (EU) [please insert reference – proposal |
for a Regulation on the legal tender of euro banknotes and coins - COM/2023/364] would |
harmonise legal tender for cash and ensure that cash is widely distributed and effectively |
used. |
(7) |
Future developments in digital payments may affect the role of the euro in retail |
payment markets both in the European Union and internationally. Many central banks |
around the world are currently exploring the issuance of central bank digital currencies |
(‘CBDCs’) and some countries have already issued a CBDC. In addition, so-called |
third country stablecoins not denominated in euro, could, if widely used for payments, |
displace euro denominated payments in the Union’s economy by satisfying demand |
for programmable payments (which are referred as conditional payments in the context |
of this Regulation), including in e-commerce, capital markets or industry 4.0. A digital |
euro would therefore be important to maintain the role of the euro in the digital age. |
(8) |
It is therefore necessary to lay down a legal framework for establishing a digital form |
of the euro with the status of legal tender, for use by people, businesses and public |
authorities in the euro area. As a new form of the euro available to the general public, |
the digital euro should have important societal and economic consequences. It is |
therefore necessary to establish the digital euro and to regulate its main characteristics, |
as a measure of monetary law. The European Central Bank is competent to issue and |
to authorise the issuance of the digital euro by national central banks of the Member |
States whose currency is the euro, exercising its powers under the Treaties. On the |
basis of those powers and in accordance with the legal framework set out in this |
Regulation, the European Central Bank should thus be able to decide whether to issue |
the digital euro, at which times and in what amounts, and other particular measures |
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