Debate: Digital euro
Date: WEDNESDAY, 19 APRIL 2023
Speaker: Mairead McGuinness
Language: EN

You’ve already heard that many governments and central banks around the world are looking into possible central bank digital currencies. And for the last two and a half years, we’ve examined whether a digital euro would be possible or desirable, and what the requirements would be. We’re doing that work hand in hand with the European Central Bank, discussing key aspects of a possible digital euro. And that’s why we very much welcome the political debate on the project. The single currency is a symbol of the European Union and of European unity. Bringing the euro into the digital age is a big European project and it is a very political project. And that means the digital euro needs to be supported by the European public and a strong democratic process. So the European Parliament has a vital role to play in this debate. And, of course, you will soon be asked to look at our legislative proposal. So just a few words on what a digital euro is, why we might need it and some details of the legislative proposal. So to the basic question: what is a digital euro? We all understand what physical cash is and how to use it. Central banks issue coins and banknotes and they play a key role in monetary systems. A coin or a banknote is a direct liability on a central bank. When we use private money, our confidence in it is based on the fact that you can convert it back to central bank money. A digital euro would be a complement to physical cash, which keeps its important role. Indeed, I mentioned that in the last debate. A digital euro would play a similar function to cash, providing us with access to central bank money in a digital world. The digital euro – like cash today – would be backed by a central bank, and that’s also the real contrast to existing private digital currencies like crypto-assets. A digital euro would be safe, secure and sound. So now to ‘why we would need a digital euro’. Let me talk about four main points here. The first one is that in a very rapidly digitalising economy, the share of payments in cash is declining, while digital payments are on the rise. This trend is likely to continue. So we want to make sure the euro is fit for the future and we want to keep our access to public money in a digital world. The second and related point: a digital euro could support financial inclusion. We know that people without bank accounts and other vulnerable groups rely heavily on cash for payments, and that means they face new risks as cash is used less. We would like a digital euro that can be used not only online but offline, too, for example in person-to-person payments or to pay in physical shops. We should also make a digital euro accessible to more vulnerable groups, including people who are not familiar with electronic devices or mobile apps. Third point: a digital euro is essential to support the EU’s open strategic autonomy. Private companies are developing stablecoins, crypto-assets whose value is pegged to another currency, usually not the euro. Central banks around the world are investigating, piloting and even issuing digital currencies. If we don’t provide our own solution, then we run the risk of private stablecoins or foreign central bank digital currencies filling the gap. And that could affect the role of the euro, both in the European retail payments market and in international trade. Fourth, and finally, a digital euro could foster innovation in payment systems and the economy at large. The payment systems we have at the moment are national or international. The digital euro could foster competition in the payment field, not crowding out existing means of payment. A digital euro should give citizens and businesses an additional payment option to use anywhere in the euro area, and they could always rely on it and know that their personal data is protected. A digital euro could support more innovation in payments, such as machine-to-machine payments that work without human interaction, like the automatic recharging of cars, logistics or deliveries. As I noted, a digital euro is not intended to replace cash, but rather to complement it. And it’s in this spirit that the Commission intends to adopt a legislative proposal on the legal tender of cash in parallel to the digital euro proposal. And this is about maintaining the role of cash as legal tender in our economy, making sure we keep sufficient access to cash and keeping cash as an accepted form of payment. Our upcoming regulation is intended to establish and regulate the essential aspects of the digital euro, and this is in full respect of the competence of the ECB, because ultimately the decision to issue a digital euro remains up to the ECB. I cannot pre-empt decisions to be taken by the College of Commissioners, but I want to speak about some key issues we believe the upcoming legislative proposal should address, and these include legal tender. The legal tender status of the digital euro would ensure consistency with cash and make digital central bank money widely accessible in the euro area. On privacy, there is a delicate balance to be struck between privacy and anti-money laundering requirements. On financial stability, the digital euro should be a means of payment, but should not become a large store of value. We want to avoid the disintermediation of banks and any risk to financial stability. On the area of distribution and compensation, the digital euro would be distributed by private payment service providers, and these entities should receive a fair compensation. On financial inclusion, we are considering a series of basic services for people to be provided free of charge or at a reasonable price. And finally, the use of the digital euro outside the euro area. I want to thank members of this House who will share their views on this digital euro project, because I think your insights are really important and helpful, informing our preparation of the legislative proposal. And we’re looking forward to continuing to work with you on this important initiative. The Eurogroup has also expressed strong support for the digital euro project and indeed our Minister has outlined the views of the Eurogroup. Our targeted consultation last summer fed into our work also and we’ve engaged with public and private stakeholders, consumer organisations, businesses and financial institutions. And, indeed, this project has evolved over time. We have raised many questions. We have had answers. But sometimes the answers indeed lead to further questions. And I think that’s how it should be, because this is a very new area that we move into. So in conclusion, I would just say that this digital euro can only be a success if it has strong democratic foundations. And that’s why this House plays a vital role in our debate and why I am delighted that we are having this exchange today.