- The European Commission has proposed a law to initiate the digital euro project, assuring free access for all EU citizens, online and offline, with an emphasis on preserving privacy in offline transactions.
- The introduction of the digital euro is projected to augment existing private digital payment options, with final approval and implementation resting with the European Central Bank.
The European Commission is embracing the future, introducing legislation on June 28, 2023, that could lay the foundation for a digital euro. This revolutionary proposal forms part of the EU’s effort to enhance the financial ecosystem, providing an alternative to physical cash while ensuring continuity of traditional monetary mechanisms.
The proposed legislation aims to guarantee unrestricted access to the digital euro across the EU, enabling digital euro transactions through various devices, online and offline. The move is designed to establish a legal framework for the digital euro as a supplement to physical euro notes and coins, rather than a replacement.
In today’s rapidly digitizing world, the proposal recognizes the need for an additional, publicly available, secure, and affordable digital payment method alongside existing private options such as credit cards and apps. This could serve to make transactions within the Eurozone more seamless and convenient.
The European Commission emphasizes that facilitating payments in both online and offline environments is critical. Offline payments, in particular, present an opportunity for enhanced user privacy and data protection. When using the digital euro offline, transactions are designed to be private, ensuring that only the participants involved know what goods or services have been paid for.
According to the proposal, basic digital euro services will be offered free of charge to individuals. Banks and other payment service providers across the EU will distribute the digital euro to citizens and businesses. This system will also enable citizens without bank accounts to access digital euros through postal offices or other public institutions, enhancing financial inclusion.
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If adopted by the European Parliament and the European Council, this law would formalize the legal framework for the digital euro. However, the ultimate decision to implement it rests with the European Central Bank (ECB). In conjunction with the digital euro proposal, the European Commission also submitted a bill to legally guarantee the circulation of physical cash.
The digital euro falls under the umbrella of Central Bank Digital Currency (CBDC), a form of digital currency issued by a country’s central bank. While it offers the potential for cost reductions and efficiency improvements in currency management and transactions, it also presents challenges regarding data privacy, security, and potential impacts on the financial system.
The European Central Bank (ECB) welcomed the European Commission’s legislative proposal, with ECB President Christine Lagarde stating that a decision regarding the establishment of a digital euro, a Central Bank Digital Currency (CBDC) for the EU, will be made by the end of October this year. The process after the decision, according to Lagarde, will involve testing, experimentation, and fine-tuning of the digital euro.
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