On Monday 24 June, the European Central Bank (ECB) published a report outlining the progress made on the digital euro project since the start of the preparatory phase. In it, the ECB presents the results of the technical work carried out in the areas of privacy protection, offline functionality and the compilation of rules.
This preparatory phase is taking place in parallel with an ordinary legislative procedure aimed at providing a framework for the digital euro project (see EUROPE 13211/11), should it be launched by the Governing Council.
The document includes an indicative schedule of the stages in the preparation phase.
Calibration of the holding limit for digital euros. The report returns to one of the points most discussed by the various stakeholders: the limit on the amount of digital euros held.
The ECB has worked on a methodology for calibrating this limit within a specific working group with the support of the national central banks and the national competent authorities.
The ECB states that the aim is to strike a balance between an optimal user experience and financial stability.
According the ECB, users would be able to link their digital euro wallet to a commercial bank account. This would allow them to make payments via their digital euro wallet without having to pre-load it with funds, enabling them to make or receive large payments in digital euros.
Prior to this being possible, the working group will carry out a full monetary and economic assessment, which will include an analysis of the potential impact of the digitalisation of payments on the demand for euro banknotes and an exercise to collect data from major banks - which is already underway - to inform the assessment.
Compensation model. The compensation model for digital euro distributors will be decided by the co-legislators.
Nevertheless, the ECB is in favour of a model that generates “fair and reliable” economic incentives for payment service providers. In line with the Commission’s proposal, the ECB believes the basic functions of the digital euro should be free and accessible in the same way throughout the euro area.
While the formal responsibility for regulating fees lies with legislators, the ECB has provided technical expertise in analysing the dynamics of the euro retail payments market.
Its technical opinion indicates that European payment solutions remain fragmented at national level and that competition remains limited at the point of interaction. This lack of competition is particularly pronounced for card payments and leads to significant additional costs for merchants.
In addition, successful national initiatives are finding it difficult to compete on a European scale with large international companies.
Lastly, the ECB recalls that a working group dedicated to compiling rules has been set up (see EUROPE 13420/32). It announced the publication of a new report on the progress of the group’s work before the publication of the next version of the draft rulebook at the end of the year. A consultation is planned for early 2025.
Link to the report: https://aeur.eu/f/csi (Original version in French by Émilie Vanderhulst)