The European Commission today introduced two proposals aimed at enhancing the use of both physical and digital forms of the euro across the euro area.
The proposals aim to safeguard the use of euro cash and establish a legal framework for the potential issue of a digital euro by the European Central Bank (ECB) as a complementary form of currency to physical cash.
While the euro continues to be a symbol of European unity and strength, payment preferences among individuals and businesses have significantly evolved. Despite 60% of survey respondents expressing the desire to retain the option to use cash, there is a noticeable shift towards digital payments through cards and applications offered by various banks and FinTech firms, a trend that was catalysed by the COVID-19 pandemic.
To cater to these evolving trends, the Commission has proposed measures to ensure that citizens have both payment options – cash and digital – readily available. A key part of the proposed legislation includes setting up a framework for a potential digital euro, providing an additional option that allows people to pay digitally with a widely accepted, affordable, secure, and resilient form of public money in the euro area. The digital currency proposal offers a cheap and secure digital payment solution, allowing transactions both online and offline.
The legal tender of euro banknotes and coins, widely accepted across the euro area, has been given additional attention under the new proposal. It stresses the accessibility and acceptance of cash, addressing emerging issues in certain member states and sectors where access to cash has been compromised due to ATM and bank branch closures.
On the digital front, in response to the economy’s digitalisation, the ECB is considering the introduction of a digital euro, which would offer consumers an alternative pan-European payment solution. The digital euro would provide more choices for consumers and enhance the international role of the currency. The digital currency would work like a digital wallet and could be used for payments both online and offline. Banks and other payment service providers across the EU would distribute the digital euro to people and businesses.
The proposal for the digital euro also outlines that it could serve as a foundation for further innovation, enabling banks to offer innovative solutions to their clients.
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