- Commissioner Mairead McGuinness has said the EU plans to table legislation on a CBDC early next year
- There is concern that the EU could get left behind if it does not work on a digital euro soon
As first reported by Politico, the European Commission has resolved to coin legislation around a digital asset, leading to a bill set to be proposed in early 2023.
The EU’s Commissioner for Financial Stability, Financial Services, and the Capital Markets Union Mairead McGuinness said at a recent fintech event that the commission would establish “a targeted legislative consultation” over the next few weeks.
The European Central Bank (ECB) has started conducting internal trials on the digital euro designs, with a prototype expected to come towards the end of 2023. However, the consent of Eurozone governors is required if the digital coin shall be introduced. If approved, the digital euro should be in circulation by 2025.
Additionally, the legislative plan intends to ensure European Union-wide implementation of instant payments via SEPA Instant Credit Transfer (SCT Inst) in Q1 next year to smoothen trans-border, real-time payments. The initiative also aims to encourage open banking efforts within the Euro Zone.
Regulators worry that crypto threatens the stability of native currencies
All around the world, central banks are studying CBDCs as governments seek to define a centralised digital coin. The heightened interest in CBDCS results from the worry that as crypto becomes even more popular, they could threaten native currencies.
“If we don’t satisfy this demand, then others will do it. As co-legislators you will play a key role in any changes to the EU legislative framework that may be necessary to introduce a digital euro,” European Central Bank Executive Board member Fabio Panetta said last November, as he rooted for the creation of a digital euro.
Should the coin be implemented as planned, it would follow what some other countries, including China, have attempted to establish. The Asian country has made arguably the biggest strides, having already conducted up to city-wide pilot programs for the e-CNY.
The support is there
France and Germany requested the Governing Council of the ECB chaired by Christine Lagarde to speed up the work in establishing a digital euro last year. The two nations harbour concerns that the European Union might get behind in this digital revolution.
A Digital Euro would cut bank interest rates and smoothen transactions as per research the ECB conducted last year. The report found that an ideal digital euro would establish privacy measures, be cheap and easy to use, and integrate existing payment systems.
“A digital euro can only be successful if it meets the needs of Europeans,” Fabio Panetta said at the time.
While the initiative has received support, approval from the Governing Council is required for any actual implementation to kick off.