MEPs welcomed explorations into digital forms of payment but voiced concerns about safety, inclusiveness and the stability of financial systems following the introduction of a digital euro.
On Monday evening, Fabio Panetta, Member of the Executive Board of the European Central Bank and chair of the high-level task force on a digital euro, presented the recently published report which stresses that a digital euro will complement cash rather than replace it, and that it will be a costless and risk-free form of payment.
In discussions, MEPs recognised the necessity to modernise payments in light of recent developments by foreign actors such as the Bank of China, or Facebook working on its own digital currency - Libra. They emphasised the need to avoid foreign players becoming dominant in the EU payment system and stated that they expect a digital euro to benefit the international role of the euro, making the EU financial markets more attractive to investors.
The ECON MEPs expressed their concerns about the inclusiveness of a digital currency and stressed that it should be available to all cash users and adapted to their needs. Moreover, they asked about cyber security, data protection and how to prevent a digital currency from being used for money laundering or tax evasion.
Finally, MEPs pointed out that a digital form of cash might become more attractive than bank deposits prone to interest rate swings. Consequently, consumers might convert their savings into digital euros, thus undermining the stability of the EU banking system.
Addressing their concerns, Mr Panetta explained that a digital euro would increase privacy in digital payments as central banks have no commercial interests regarding personal data, and respect the right to privacy. Furthermore, since digital euros retain the legal tender status of physical euros, payments in digital euros would have to respect anti-money laundering and tax evasion rules.
Mr Panneta assured MEPs that the design of a digital euro will be consistent with the ECB’s policy objectives but admitted that strategies are still being explored to prevent mass transfers from bank accounts to digital currency, which is intended as a form of payment and not an investment.
He concluded that there are many challenges and that the process will take a long time but repeated that the ECB is determined not to be taken over by foreign and private players and therefore, and that the project must be started soon and in cooperation with major global central banks. Mr Panetta stated that such a project could begin in 2021.