More and more details are being revealed about what the digital euro will be like. In a complex geopolitical context following Donald Trump's victory and marked by the tariff war, Europe seeks to break its dependence on large American companies like Visa, Mastercard, Google, or Apple when it comes to making payments. With this, it seeks to avoid the capital flight, in the form of commissions, that these companies charge to businesses, which in turn end up passing the cost onto consumers. These are some of the answers regarding the current status of the process.
When will the digital euro start operating?
The exact date is unknown. The technical work on the digital euro will, on paper, be completed in October. But that doesn't mean, by any means, that it is the time for its launch. From there, it would be ready to conduct the first tests, but to launch them, we will wait for European institutions to approve its regulation, in case any adjustments are needed. Without the consent of Brussels, the digital euro cannot get started.
Why is it necessary if we already pay digitally with a card or Bizum?
The ECB seeks to provide Europeans with a free alternative to non-EU payment systems like Visa, Mastercard, Apple, or Google, which in many cases charge fees for their use, money that leaves the continent, and act practically as monopolies, increasing the risk of harming European consumers and businesses if they choose to raise their fees. Also, to prevent stablecoins linked to the dollar, promoted by Donald Trump, from gaining market share. Moreover, it aims to facilitate direct payments to the Administration, allow payments between individuals like Bizum, or enable Europeans, when traveling, to use their digital euros in the same way they would in their home country, which does not happen now because some states impose certain restrictions on card payments. Another potential advantage is that money could be sent without the need to be connected to the internet, through proximity or QR code.
In the geopolitical arena, the exclusion of Russian banks from the international SWIFT payment system has shown that payment infrastructures are increasingly becoming a weapon of war, and relying on foreign platforms puts you in a position of weakness.
Will it be easy to pay with digital euros?
The intention is that owners of digital euros can pay at any store with their mobile phone, but it is also being considered that those who wish can use a physical card to facilitate the experience, given that not everyone is familiar with mobile payments. To achieve this, the idea is to adapt the current payment terminals to minimize infrastructure costs. Cash will continue to exist as it does now, as the intention is for both to coexist.
Who will the suppliers be?
The digital euro involves having a technological infrastructure, and here the European authorities have not beaten around the bush: the tender will only be open to European companies, excluding the American ones. The decision sends a clear message: breaking the dependence on the U.S. requires having a fully European system.
Will it affect the banks' business?
That is one of the ECB's concerns. Frankfurt wants to maintain the balance between the digital euro and the banking business. And believes that the entities will be able to adapt. Customers will continue to need to set up direct debits or open deposits, and those services are provided by banks, which will also offer digital euro wallets. The ECB's intention is not to drive private initiative out of its business or enter a race to gain market share, just as it does not fight to ensure that everything is paid in cash. It is also being considered that there should be a limit of 3,000 digital euros per person, and that the wallet should be connected to the customer's bank. Thus, if the balance runs out, it would be possible to take the rest of the money from the customer's bank to make the payment, and vice versa.
Are businesses required to accept it?
Yes. Being legal tender, they cannot refuse customers who wish to pay with digital euros, just as they cannot refuse to accept cash. Although this obligation will only exist for those that currently accept card payments. It remains to be seen how merchants will be helped to adapt payment platforms to be compatible with the digital euro.
Is privacy guaranteed?
The Eurobank will not have access to the identity of the clients. Only to a code with letters and numbers. So you will only see an amount associated with each account, and the entities will communicate, for example, that code X wants to pay an amount to code Y. You will not know, therefore, why money is being moved or who is behind it. It is also not proposed to impose conditions, such as that it can only be spent in certain establishments that meet specific requirements like complying with emission standards or others, although there is concern in certain sectors that it could become a tool for controlling citizens.
Have other countries implemented their digital currencies?
To date, only three countries have officially launched their own retail digital currency: the Bahamas (in 2020), Nigeria (in 2021), and Jamaica (in 2022). But the motivations have been different. In the case of the Bahamas and Jamaica, for example, it was a necessity due to the difficulty of bringing cash to islands with hardly any banks. However, there may soon be many more. According to a study by ING, 103 jurisdictions are exploring the possibility of launching such a digital currency, 44 of which are in the pilot testing phase, 20 developing the currency, and 39 in the research stage.
Among the major powers, China has a more advanced digital yuan than Europe has with its euro, due to its highly digitized payment system that relies too heavily on two private companies, Alipay and WeChat, which are also not interoperable with each other, significantly fragmenting the system. In contrast, the United Kingdom is somewhat lagging behind Europe.
Source: Cinco Días