The European Commission has today published a bill for a digital euro. The legislation will require banks to act as intermediaries, providing basic central bank digital currency (CBDC) services for free without receiving direct compensation from the EU. Also, phone manufacturers like Apple must enable access to NFC technology. The EU has already launched a complaint against Apple over restrictions that prevent others from providing wallets that compete with Apple Pay.

“Today’s proposals will also ensure that cash continues to be fully available, while allowing the European Central Bank to develop, over time, the practicalities of the digital euro,” said Valdis Dombrovskis, Executive Vice President of the European Commission. ” It would be secure, instant and convenient, online and offline, offering more choice to the consumer along with private digital payment options such as cards and apps. “

Obligated banks and limited income

While banks are required to provide online and offline services, other payment providers can choose whether or not to participate. The provision of free services by banks applies to consumers, not to businesses, and only to basic services. They are required to provide dedicated onboarding assistance to people with disabilities, the elderly, and the digitally challenged.

Intermediaries must have contracts with end users, to which the European Central Bank is not a party.

Payment providers may charge fees to merchants and for transactions between payment providers (inter-PSP) and the European Central Bank (ECB) will limit the level of the fee. Fees cannot be higher than comparable digital payments and must be based on cost “with the possible addition of a reasonable markup.” Costs will be measured based on the most efficient providers. The legislation states that “inter-PSP fees or merchant service charges shall provide sufficient compensation for payment service providers to distribute the digital euro.”

This statement is despite observations that a digital euro could result in lower revenue for certain payment providers.

Who can use the digital euro

Both online and offline digital currency will have legal tender status, which means businesses will accept it for payments. However, small businesses with fewer than ten employees or a balance sheet of less than €2 million do not have to accept it, unless they already support digital payments.

The use of the digital euro is not restricted to EU residents in the legislation. Visitors and former residents can access the digital currency, and it also allows non-euro EU states and foreign countries to use it. However, these jurisdictions would need to have agreements with the EU, which prevents the EU from infringing on their monetary sovereignty.

digital euro privacy

The legislation requires privacy-preserving measures “to ensure that individual users of the digital euro cannot be directly identified by the European Central Bank and national central banks.” Privacy advocates might feel more comfortable if the word ‘directly’ had been left out. Because the clause still explicitly allows the processing of central bank personal data for supervisory banks and payment providers.

To enforce the holding limits set by the ECB, payment providers will need to check whether a user already has another digital euro account upon onboarding. The ECB will play a role in this.

Offline usage has some special privacy provisions that prohibit payment providers from retaining transaction data. Anti-money laundering procedures will be applied at the entrance and exit ramps, to top up and withdraw digital euros.

The preamble to the legislation acknowledges that the legislation affects the fundamental right to privacy and the protection of personal data. It says that any limitations on this are only where it is “strictly necessary”.

The digital euro will not generate interest.

Once the legislation is approved, only the ECB has the authority to decide when to issue the digital euro.

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