European Central Bank (ECB) executive board member Piero Cipollone spoke before the European Parliament Committee on Economic and Monetary Affairs about preparations for the issuance of a digital euro. He addressed four issues the central bank was facing, and how the ECB would guarantee the public’s ability to use a free common means of payment.
Cipollone said the ECB has begun looking for infrastructure providers for the European Central Bank digital currency (CBDC). “Our readiness would be compromised if we started searching for possible suppliers only after that decision [to launch the digital euro] is made,” Cipollone said on Feb. 14, adding that agreements would be flexible in regard to legislative and technological developments. In addition:
“Only legal entities with registered offices in the EU and controlled by such entities or EU nationals will be eligible to participate in the procurement process.”
This may be fateful for Amazon’s future participation in the project. It was chosen to create a prototype e-commerce component for the CBDC, but another call for applicants has been issued since then.
Second, Cipollone discussed the digital euro rulebook, that is, “a single set of rules, standards and procedures for the digital euro that will ensure its harmonious implementation.” The digital euro should work like cash, Cipollone said. That would free users of dependence on international payment processors and provide equal service throughout the euro zone.
Cash and digital euro have the same objective: ensuring everyone, regardless of their income, can pay in any situation of daily life, says Executive Board member Piero Cipollone. We need to protect this fundamental right across the entire euro area
https://t.co/lfO42haYPA pic.twitter.com/CuTzL9uAbi— European Central Bank (@ecb) February 14, 2024
Cipollone compared digital euro infrastructure to literal train rails, which could be used by a variety private companies while belonging to the state.
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The independent, nonprofit European Money and Financial Forum published a paper on Feb. 15 that highlighted problematic implications of making the digital euro legal tender. It particularly emphasized legal issues relating to the status of private payment providers integrated into the euro system. Further, it called the concept of legal tender (means of payment recognized by courts and required for acceptance within a jurisdiction) a “a barbarous archaism.”
Safeguards are being incorporated into the digital euro design to maintain financial stability, Cipollone continued. The digital euro would be interest-free to avoid competition with savings institutions. There would be limits on public digital euro holding and prohibitions on businesses and financial institutions holding it. A workaround would be provided to link CBDC wallets with bank accounts to ensure transactions could be carried out without prefunding the wallets.
Finally, Cipollone touched on the digital euro and privacy. He promised:
“A digital euro would allow people to make online payments with very high standards of privacy, higher in fact than what commercial solutions currently offer.”
Cash would be retained and digital euro payments made offline would be as private as cash, with the details of a transaction known only to the payer and payee. Online, the ECB would receive “minimal set of pseudonymised data” necessary for tasks such as settlement, and users would have greater control over their information than private payment systems currently offer. The digital euro would also offer state-of-the-art cybersecurity.
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