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Fully seizing the potential benefits of a digital euro

Tristan Dissaux, 8 September 2023

This policy note presents and explains our feedback to the Commission’ Proposal for regulation on the digital euro (COM(2023) 369). Introducing the digital euro as a new means of payment is an opportunity not to be missed, and we welcome the Commission’s decision to initiate the legislative process on the matter, following the investigation work conducted by the ECB. But the Proposal only goes half-way towards the objective as it is stated by the Commission itself: to make the digital euro widely accepted and used by individuals and businesses across Europe. The digital euro’s success will depend on its value-added compared to existing payment services. In particular, we believe that it is by affirming the digital euro as a public means of payment that we can make it a safer, cheaper, more inclusive, privacy-enhancing, and more resilient alternative to existing digital payment solutions.

Executive Summary

Legal tender status of the digital euro:
  As shown by the evolution of physical cash, a de jure legal tender digital euro will not necessarily translate into a de facto legal tender digital euro - that is, in its general acceptance. Clear common standards for control and sanction procedures should be included, and exceptions should be kept to a minimum.

Distribution channels:
  We regret that commercial banks are foreseen as main providers of digital euro services. Other types of providers should be more largely considered.

  We welcome the fact that public entities are also considered as potential digital euro services providers. However, accessing the digital euro via public entities should be a real and attractive option for all users. We oppose the implicit idea that the provision of digital euro services by public entities is only a solution of last resort reserved for people who would not have access to the digital euro via private providers.
  A direct option provided by the Eurosystem (ECB itself or the national central banks) should be further explored as a complement to other distribution models.

Risk-free money:
  As a direct liability of the Eurosystem, the digital euro could be a useful safe haven, especially in times of financial turmoil.
  The “do no harm” approach in regard to commercial banks and their deposits should not come at the expense of the accessibility of the digital euro.
  Rather than a source of financial instability, the digital euro should be seen as an opportunity to reduce the systemic risk of the financial system.
  Digital euro accounts should not be weighed down with holding limits.

Free payment services:
  Although payment service providers (PSPs) would be mandated to provide basic digital euro services free of charge, most of them (especially commercial banks) would be in a position to cross-sell digital euro services and their own services, thus adding indirect costs for users. This would result in rent incomes, to the detriment of users.
  Provisions options devoid of any profit motive (through not-for-profit entities) should be given greater importance in order to ensure effective free access to the digital euro.

Universal access to digital payments:
  Given the non-compliance of commercial banks with the payment accounts directive (PAD), relying on mandatory provision for digital euro accounts cannot be considered as guaranteeing accessibility for all.
  Universal access to digital euro accounts would be better guaranteed by not-for-profit providers able to cater for the needs of vulnerable groups.
  To ensure universal access, the offline digital euro should be accessible to non-registered users through universal access devices.

Financial inclusion:
  Inclusive usage features for the digital euro (such as audio features for blind people for example) should be included in the legislation, after being developed with concerned persons. All PSPs should be mandated to include these features in their front-end solutions. The front-end solution developed by the ECB should be the benchmark of such inclusive features.

  In response to the widespread collection of personal data by private corporations, a fully public option for digital euro payments should be made available, for involved data to be processed by entities without interests in monetising them.
  The offline digital euro should offer the same level of anonymity as cash does today: it should be possible to store it on non-registered (non-nominative) devices.

Resilience of payment systems:
  The digital euro should not be limited to a “payment scheme” but also offer an “end-to-end solution” for payments. In this way, it would bring redundancy to existing networks and increase the resilience of the payment system as a whole.
  The offline digital euro should be exchangeable in a fully peer-to-peer manner, so as to remain available in the event of internet or power outage. Low-energy smartcards should be provided for that purpose.

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