As a seasoned crypto investor with a keen interest in global financial developments, I find myself closely monitoring the progress of the digital euro. Having navigated through the tumultuous seas of various cryptocurrencies and central bank digital currencies (CBDCs), I can appreciate the significance of this development for Europe and its economy.
The European Central Bank recently published a second update on the initial phase of introducing a digital version of the euro. Topics such as setting restrictions for the use of the central bank’s digital currency (CBDC) and aligning legal requirements were among the issues discussed in this report.
Sticking points at the halfway mark
As a crypto investor, I see the ECB report as a milestone along the journey, marking the middle ground of the preparation phase that comes after the investigation and design stages.
Following the examination of the guidelines for creating the digital euro, the Rulebook Development Team has initiated seven task forces comprised of both market players and central banks to further advance its progress.
The guideline aims to align various country’s laws for consistent global standards. An update on its advancement was published in September, with another update due in July 2025.
The work goes on to develop a digital Euro user profile, aiming to understand the requirements of potential users. This information will encompass their preferences regarding storage limits, which will be taken into account during technical studies carried out alongside national central banks.
According to a report by Politico in October, setting limit restrictions is a subject of disagreement between the European Central Bank (ECB) and local central banks.
One solution under consideration for maintaining an upper holding limit is a “reverse waterfall” that would automatically transfer excess digital euros to fiat in a linked bank account.
The investigation continues regarding a potential solution for transactions that don’t require an internet connection, according to the report, though specifics were not provided.
Keeping the euro European
A major topic in the report was competition in the financial market between European and non-European service providers and the need for more technical services, such as wallets. The report emphasized:
“Payment service providers (PSPs) would be able to use the digital euro infrastructure to create new payment services. […] A digital euro would also help regional and domestic European schemes to scale up the provision of their payment […] using the digital euro acceptance network.”
The report suggested there might be opportunities to enhance the digital euro’s user experience for those who prioritize privacy more highly. This way, they could enjoy a level of anonymity similar to using physical cash.
In February, Piero Cipollone, a member of the Executive Board at the European Central Bank, assured that the digital euro will boast a level of privacy “actually superior to what is available with existing commercial services.
The process of choosing technical service providers goes on, and so does our engagement with the public and other relevant parties.
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2024-12-03 00:44