Fabio Panetta, a member of the European Central Bank (ECB) Executive Committee, recently announced that the European Commission will present a legislative proposal for a digital euro in June. He further stated that the next steps would be decided in October.
The digital European regulatory framework is in progress
in interview With the official website of the European Central Bank, Panetta confirmed that the eurozone bank is in regular contact with the European Commission to create a regulatory framework for a digital euro. The digital euro is set to become the official central bank digital currency (CBDC) of 27 countries in the European Union.
“We are studying the design and distribution of the digital euro and its impact on the financial sector,” Panetta stated. He also stated that the proposal expected to be submitted in June will receive a response from the ECB Governing Council in October.
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The Board will then decide whether to initiate a preparation phase for the development and testing of the Digital Euro. According to Panetta, the European CBDC testing phase could last from two to three years.
If everything progresses smoothly and both the ECB’s Governing Council and lawmakers in the European Parliament endorse the proposal, a digital euro could be launched in about three to four years, Panetta estimates.
Will the digital euro gain significant adoption?
During the interview, Panetta was asked about the potential benefits and risks of using a digital euro. In response, he stressed the need to provide citizens with risk-free digital payment methods that can be used freely throughout the eurozone.
Panetta emphasized that such a solution does not currently exist, pointing out that the card payment market is dominated by non-European companies, especially referring to Visa and Mastercard. He stated that such a situation would be unthinkable in the United States, and expressed concern about companies selling users’ personal data.
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Panetta also stressed the importance of central bank money remaining at the heart of the financial system. The increasing adoption of cryptocurrencies such as Bitcoin (BTC) raises concerns for entities such as the European Central Bank.
Addressing concerns about privacy, Panetta clarified that the ECB will not have access to personal data. Financial intermediaries will handle the distribution of the digital euro, and a balance must be found between ensuring confidentiality and combating money laundering and terrorist financing. Panetta noted that the responsibility for finding that balance rests with lawmakers.
CBDCs are on the rise
Central bank digital currencies (CBDCs) are already on the rise as countries around the world explore the potential of digital currencies issued and regulated by central banks. Countries like the Bahamas and Nigeria have already launched their own digital currencies, while China and Japan are in advanced experimental stages.
Featured image from iStock.com, chart from Tradingview.com
