European Commission Proposes Digital Euro for Convenient Offline and Online Payments

The European Commission has proposed allowing individuals to securely store up to €3,000 digital euros in wallets for convenient offline and online payments. Responding to the increasing use of digital tools for everyday transactions, the Commission aims to introduce a digital euro as a Central Bank Digital Currency (CBDC), effectively electronic cash. This initiative seeks to provide European consumers with an alternative payment solution that spans across the Eurozone.

During a press conference, Valdis Dombrovskis, the Commission’s Executive Vice-President, highlighted the significance of the digital euro: “With the digital euro, people will have the ability to transact using ‘public money’. Importantly, they will be able to make both online and offline payments.” He emphasized that possessing a digital euro wallet on a mobile device would be equivalent to carrying coins and banknotes, enabling seamless transactions without requiring an internet connection. Dombrovskis further emphasized that the digital euro would be legal tender, underpinned by the European Central Bank to ensure universal acceptance throughout the Eurozone.

According to the Commission’s data, 55% of EU citizens prefer cashless payments, while 22% prefer cash and 23% have no preference. However, this proposal has encountered objections from various parties, including concerns about privacy and potential bank runs voiced by commercial banks. In response, the Commission reassured that personal data would be fully protected, with banks and even the ECB unable to view or trace individuals’ personal details or data. Offline payments would offer a level of privacy similar to that of cash transactions.

To address concerns regarding financial stability, the Commission plans to impose a limit on the amount of digital euros individuals can hold. This measure aims to prevent significant outflows from banks and safeguard financial stability. The proposed limit suggested by ECB officials is €3,000.

The final legislation requires approval from the EU’s 27 member states and the European Parliament. The ECB is expected to authorize the launch of the digital euro in October, with the goal of introducing it by 2027.

China emerged as the first major economy to launch a digital currency in 2020, and countries such as Jamaica, the Eastern Caribbean, and the Bahamas have also implemented their own digital currencies. The United States is currently in the process of developing a digital dollar, although experts anticipate it will take several more years to materialize.