Digital Euro Would Strengthen Europe’s Financial Sovereignty and Resilience: ECB Member

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Sujha Sundararajan

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September 24, 2024 06:26 EDT

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The European Central Bank (ECB) official Piero Cipollone has outlined the benefits of a digital euro, stressing how it would bolster Europe’s financial sovereignty and resilience.

Speaking at the Committee hearing on Economic and Monetary Affairs, Cipollone highlighted the digital form of euro’s “tangible benefits” to all stakeholders.

“It would empower Europe to independently develop and manage digital payment solutions,” he stressed.

A digital euro would represent central bank money in digital format (CBDC), offering an efficient and inclusive payment solution.

Cipollone said that the CBDC project, which started in 2021, is at the “midpoint of the preparation phase.” He hinted that the project preparation has roughly one more year to go.

This aligns with the ECB President Christine Lagarde’s forecast to launch the CBDC before her term ends in 2027. Additionally, she stressed that a it should be “fit for the future.”

The project focuses on developing a methodology for determining the maximum holding limit for digital euro per person, Cipollone added.

“The holding limits are important to ensure financial stability and prevent large-scale transfers from bank deposits to digital euro, especially during crises.”

Further, the bank is also working to finalise the digital euro rulebook, which would provide a “clear set of rules and standards to ensure a consistent user experience across the euro area.”

Besides, the ECB is also in the process of selecting potential providers to develop a CBDC infrastructure. In addition to that, the project is also undergoing strict technical runs to check privacy and offline functionality.

Digital Euro Benefits Consumers, Merchants, Banks

“Consumers could use a digital euro for all payments, everywhere in the euro area, also when shopping online.”

Additionally, making or receiving payments with digital euros would be free of charge and accessible to everyone across the eurozone. This would also ensure user privacy and data protection, Cipollone said.

For merchants, a digital form of central bank-issued cash would cut the costs involved in international card schemes.

“A digital euro would include safeguards for merchants by capping the fees they pay to banks for processing payments.”

When it comes to banks, Cipollone noted that a digital euro would open up a new source of revenue. Also, banks would be responsible for distributing the CBDC, thus serving as a point of contact for users.