Payments by digital euro would therefore (theoretically) be simpler than today’s digital payments. Rather than your bank having to settle a mind-bendingly complex and behind-the-scenes transaction with the vendor’s bank using third-party payments companies (like Visa or Mastercard), you would simply send the digital euros from your digital wallet directly to the vendor’s digital wallet. It would be just like handing over cash. On paper, no banks or payment companies need be involved — although in practice, they would need to participate in the digital euro’s distribution.
In other words, a digital euro would break the private sector’s hold on digital payments.
Where is the proposal at?
Stuck in Brussels. Although the digital euro is the ECB’s baby, EU governments and members of the European Parliament are the ones tasked with putting the project’s legislative framework together. That has blended politics into the debate, muddying the waters from the perspective of technocrats. MEPs, for example, have heeded concerns that governments could use the digital euro for snooping on people’s payments — a notion the ECB has trashed.
Many within the banking and financial industry, meanwhile, have branded the project “a solution looking for a problem” amid fears they’ll foot the bill for implementing the infrastructure needed to run the digital euro. Its introduction could also stifle future innovation by dictating the future direction of the EU’s payment industry, they argue.
Industry lobbying has paid off. Navarrete has called the digital euro “a last resort” and “a nuclear threat” that will force the industry to develop a cross-border payment system before the bill is ready.
Will the ECB succeed?
The Parliament is only one beast the ECB has to contend with. Government officials in the Council of the EU, which represents the various member countries of the bloc, aim to finalize their negotiating position on the digital euro bill by year’s end. Their involvement has the ECB on edge as well — especially as the Council wants to have the last say on how many digital euros a citizen can hold at any one time, to placate lender fears of a bank run.