European Commission To Propose Digital Euro Bill Early Next Year

The European Commission said it will propose a bill for a digital euro early next year, as it races to roll out a central banck digital currency, or CBDC, to balance the increasing popularity of cryptocurrencies with the need for regulation and financial stability.

On Wednesday, the Commission's finance chief Mairead McGuinness disclosed the EU's formal consideration of digital euro law at a fintech conference.

Meanwhile, the European Central Bank (ECB) has been working with digital euro designs and technologies, with a prototype due in late 2023. The introduction of the digital euro requires the consent of Eurozone governors and, following their approval, the digital euro may be in circulation by 2025.

The digital euro is a CBDC, a kind of financial instrument being studied by central banks globally. The heightened interest in CBDCs stems from the growing worries over cryptocurrencies' popularity posing a threat to fiat currencies.

Countries like India and China have already announced their plans to launch CBDCs. The Central Bank of the Bahamas was one of the first to issue a CBDC, the Sand Dollar, in October 2020. Today, many governments are working on CBDCs, with Kenya's central bank recently soliciting public feedback on a digital shilling and Thailand currently enacting regulations for a potential retail CBDC.

India's digital rupee will be released sometime during fiscal year 2022-2023, which begins April 1. In contrast, The People's Bank of China (PBOC) has said that the e-CNY digital currency will be fully operational by this month .

Nigeria has already released its own CBDC, eNaira, making it the first African nation to enter the world of digital currencies.

The work on the digital euro has been going on for a long time. Last year, the ECB conducted a study on digital currencies and published a report. It was revealed that a digital euro might help lower interest rates, speed up transaction procedures and reduce the need for currency.

In mid-November, Fabio Panetta, an ECB executive board member, said, "If we don't satisfy this demand, then others will do it."

Central bankers have an uphill struggle in gaining widespread support, regardless of the apparent benefits of CBDCs. According to research undertaken by the U.K. Economic Affairs Committee and Germany's central bank, most respondents opposed government-backed digital currencies, expressing doubt about their advantages and concerns about government monitoring.