What happened?
The European Central Bank (ECB) is progressing on the journey to launching a digital euro and according to ECB’s Executive Board member, Piero Cipollone, it could be rolled out by 2029. A major breakthrough was recently achieved when euro area finance chiefs agreed on a customer holding limit framework which is crucial for controlling usage and safeguarding bank deposits. The legislative part of the project now lies with the European Parliament.
Who does this affect?
This development primarily affects the residents of the European Union who would potentially use the digital euro for daily transactions. It also affects financial institutions, such as banks and private payment service providers like Visa and PayPal, as the digital euro is expected to reduce dependency on them. Furthermore, officials are keen to prevent dollar-backed stablecoins from dominating everyday digital payments across Europe.
Why does this matter?
The introduction of a digital euro could profoundly impact the market dynamics of digital payments in Europe. By lessening the reliance on private payment giants and existing stablecoins, the ECB can control the standard for digital transactions. Supporters believe the digital euro could lower costs, increase transparency, and speed up retail payments, but questions remain about user privacy, coexistence with banks, and potential market distortion.