The European Central Bank (ECB) is preparing to roll out the digital euro in 2025, pending the necessary EU legislation to support it.
“We are in the preparatory phase and awaiting a European law,” ECB President Christine Lagarde recently stated during a speech marking the start of the new year. Once the legal framework is in place, the ECB will decide “if and how to proceed with the digital euro.” Lagarde noted that everything is becoming digital, and central bank money must follow this trend. She stressed that the digital euro would offer “the highest possible level of confidentiality” while ensuring it does not facilitate illegal activities such as money laundering or the financing of terrorism.
After years of anticipation, discussions, and unfulfilled promises, the long-awaited digital euro is finally set for official circulation by the end of 2025. Lagarde expressed hope that the European Parliament would have approved the necessary legislative framework by then.
How the digital euro will enter everyday life
“Money is one of the central means of ‘communication’ in the world, and the digital euro aims to make digital payments safer,” banking sources said. In a period of growing uncertainty and intensifying geo-economic competition, the digital euro is sometimes openly discussed as part of Europe’s geopolitical sovereignty, they added.
Officially, the digital euro represents the introduction of a Central Bank Digital Currency (CBDC). It is a digital means of conducting transactions and payments, issued by the ECB. According to banking circles, the digital euro aims to make electronic payments safer and more efficient.
It will be a digital payment tool, expressed in a monetary accounting unit, legally established as money under government regulations, and recognised as an official currency. The system will reportedly rely on blockchain technology. Bank representatives have assured that the digital euro will not replace physical cash but will coexist alongside it.
How it differs from cryptocurrencies
The digital euro is fundamentally different from cryptocurrencies because it is backed by the European Central Bank, which guarantees its stability. It will have the same value as physical cash and can be used in the same way for everyday expenses, including cross-border transactions.
With the help of a QR code, the digital euro could be used for payments via a secure app on mobile phones, even in offline scenarios. Once fully implemented, merchants will be required to accept the digital euro just as they currently accept cash.
Are Europeans ready for a digital euro?
The question remains whether Europeans are ready to embrace a new digital version of the euro. Many citizens are sceptical or hesitant about the practical use of the digital euro. The challenges are clear, and as a new concept, it is still difficult for people to fully understand how it will work.
However, cash usage has declined significantly in recent years, a trend accelerated by the COVID-19 pandemic. “It essentially comes down to choice,” said Mairead McGuinness, former Commissioner for Financial Services and Capital Markets Union.
The example of China
Many countries and monetary unions have already developed digital currencies, with some even putting them into circulation. A prominent example is China, which launched its digital yuan (e-CNY) in early 2022. This development has increased pressure on the US and the EU to issue their own CBDCs.
In the United States, however, the Federal Reserve has not introduced anything comparable. This may be because the world’s most significant private digital payment service providers, such as Visa and Mastercard, are based in the US. As such, there is little urgency for the Federal Reserve to issue a digital dollar.
A pan-European payment network
For this reason alone, the digital euro project is an innovative initiative by the ECB. “The CBDC will also significantly change the operations and responsibilities of the European Central Bank and increase the pressure for innovation in the financial sector,” market insiders noted.
They emphasised that the digital currency will not eliminate cash but will work alongside it, offering Europeans the ability to make payments freely and digitally across all European countries. This would eliminate the need to share sensitive information with foreign payment networks like Visa or Mastercard.
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Source: naftemporiki.gr
