The ECON commission of the European Parliament has given the green light to negotiations on the digital euro. The goal is to reduce dependence on international circuits, but privacy and a “lame” system remain risks to be addressed.
With the green light of ECON commission of the European Parliamentwhich arrived yesterday, the adoption of the digital euro finally enters its final phase. The recent green light to the negotiating mandate has in fact definitively unlocked the legal framework of the project “digital euro”.
The new digital currency, which will be adopted at the beginning of 2027 only on an experimental basis, and will then definitively come into operation by 2029, will complement the banknotes and coins issued by the ECB.
What is the digital euro and what is it for
This is the so-called Central Bank Digital Currencywhich is a digital currency issued directly by the European Central Bank, which does not require a brokerage account at a commercial bank.
With the use of the digital euro, transactions will take place in “online” and “offline” modes. The first, which will require an internet connection, passing through financial intermediaries (such as your bank), will be ideal for e-commerce purchases and remote transfers.
The offline mode, however, will work exactly like physical cash, allowing direct payments between two nearby devices (e.g. smartphone or smart card) in the total absence of the internet.
When will the digital euro come into force it can be used in physical stores, online and between private individuals using the smartphone (via app/NFC) or via a physical payment card also designed for less digitalized segments of the population.
How the digital euro will work
In concrete terms, the system under study was designed specifically for avoid “escape” from private credit institutions.
In fact, the ECB will not open direct accounts for citizens, but the commercial banks will act sole intermediaries between the central bank and users, the digital euro will be integrated directly into home banking applications and private banks will manage the opening of wallets, identity verification and technical assistance in case of problems.
Furthermore, to avoid the flight of capital from traditional bank deposits, a deadline will be set maximum stock limit per portfolio (the technical hypotheses range between a few hundred and 3,000 euros), with the accumulated funds not accruing interest.
For private citizens all transactions and open accounts will be free of any type of commission, not so for traderswho will instead pay commissions as already happens with the use of credit and debit cards.
The risks to privacy and the “lame” system
It is therefore clear that the proposal, as currently proposed, appears a compromise measure and highly experimental.
If you take the only other digital currency already adopted and widely used, that is Chinese digital yuanthe differences immediately catch the eye.
The e-yuan is free of any type of commissionboth for individuals and merchants, the deposit of yuan into digital accounts by individuals also generates interest starting from 2026, (which is not foreseen for the digital euro) and, finally, the Chinese digital currency It has no deposit or spending limits.
And while for the digital yuan these positive sides are largely offset by the total control of the People’s Bank of China on all individual transactionsfor the digital euro the promise of “total privacy” clashes with strict European rules that they potentially leave the door open to scrutiny of transactions also in Europe.
The European Union laws on combating money laundering and the financing of terrorism (AML/CFT) are in fact very strict. Even if the ECB promises not to “spy” on citizens, i data will still have to pass through commercial banks, which by law are obliged to identify the user and monitor transactions to report suspicious activity.
There is therefore the risk of one centralization of financial data (now managed separately by various private institutions) to which government or judicial authorities may have access in the future.
Furthermore, a possible infrastructure that manages the wallets of hundreds of millions of European citizens is the perfect target for state hackers and cyber criminals. A possible large-scale data theft at the level of banking intermediaries could expose the financial history of entire populations.
Reduce dependence on American systems
The real objective therefore seems to be that of cut off the American payment giants: Visa, Mastercard and Paypal. Today as many as 13 European countries depend 100% on American systemsnot having national alternatives (such as the case of ATMs in Italy).
The disadvantages are, for example, data processing abroad, commissions decided outside the EU and risk of loss of strategic control, with strong exposure to geopolitical risks.
It is above all with these risks in mind that the digital euro initiative must be interpreted.
