Digital Euro: A Unique Path in the World of Online Payments

The finance ministers of the European Union are meeting this Friday to formulate a unified position on the introduction of a digital euro currency. Such a digital euro could present an alternative for the EU to the currently leading American payment systems, Visa and Mastercard. The EU has been discussing the creation of a digital equivalent to the euro, currently used in 20 European countries, for six years. However, the topic gained new urgency this year as the EU seeks to reduce its dependencies in key areas such as energy, finance, and defense. Spanish Finance Minister Carlos Cuerpo emphasized during the talks in Copenhagen the need to develop an independent digital payment system to reduce reliance on external providers. This is a key area in which rapid progress must be made. While political support for the digital euro is strong, the legal framework from the European Parliament is still lacking, as not all details have been clarified. The European Central Bank hopes that all necessary legislation will be passed in the first half of next year. EU Economic Commissioner Valdis Dombrovskis highlighted the importance of an independent, pan-European payment system, especially in light of growing e-commerce. A digital euro is intended to help strengthen Europe’s strategic autonomy and reduce reliance on foreign providers. The ECB has already presented plans for a digital currency, which would function as an electronic payment method independent of dominant US providers such as Visa, Mastercard, or PayPal. The draft for the digital euro was presented by the European Commission in June 2023. Nevertheless, there are concerns in the financial sector that a digital euro could divert business from the banking sector and create stability risks, such as digital bank runs. If Parliament agrees to the draft legislation, the ECB would need an additional two and a half to three years to actually launch the digital euro. Dombrovskis sees in this project both technological advancements and an opportunity to strengthen the EU’s strategic autonomy.