25 YEARS European Central Bank President Christine Lagarde (right) welcomes President of the European Commission Ursula von der Leyen (left) during a ceremony to celebrate the 25th anniversary of the ECB in Frankfurt, Germany on Wednesday, May 24, 2023. AP PHOTO
FRANKFURT: As it marks its 25th anniversary on Wednesday, the European Central Bank is readying a proposed design for a digital version of the euro, responding to pressure from developing technology that could change how money is used over the bank’s next decades.
ECB President Christine Lagarde says a digital euro could offer a way for people to buy things without depending on payment service providers controlled by non-European companies. Those could include Mastercard, Visa, Apple Pay and Google Pay.
The European Union’s executive commission is expected to come up with proposed legislation on the idea in the next several weeks, ECB officials say, while the central bank will publish a detailed proposal for the design of a digital currency in October.
Central banks worldwide, including the US Federal Reserve, are cautiously studying digital currencies as cash increasingly gives way to electronic payments. Some smaller economies such as Nigeria, the Bahamas and Jamaica already have introduced digital currencies, while China is holding trial runs.
They are also responding to the emergence of cryptocurrencies, which have raised concerns that someday people could turn to rival forms of digital money that would undercut national currencies.
Digital currency backed by a central bank would be a safe and stable means of payment — unlike volatile crypto, whose price crashes over the past year and collapses of exchanges like FTX have spurred calls for regulation. The EU became a global leader by giving final approval last week to rules for the freewheeling crypto sector.
As Europe considers its own central bank-based digital currency, the biggest question is: how would it improve on what’s already available for consumers?
“Nobody is able to answer this question, not even the ECB,” said Philipp Sandner, head of the Blockchain Center at the Frankfurt School of Finance & Management.
“As the user I ask myself, ‘What is the benefit, why do we need another solution?'” said Sandner.
Apple Pay, for instance, allows people to buy their morning coffee by tapping twice on their phones, a seamless experience the digital euro would have to match.
“You have to be at least as good as Apple Pay and Mastercard, which is difficult, otherwise people will not use it,” said Sandner.
The goal of a digital euro would be Europe’s autonomy and resilience when it comes to the largely unseen but critical systems that move money from consumers to merchants through banks and payment services providers, Lagarde said in a recent panel discussion.
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