The European Central Bank (ECB) is calling on the European Parliament to speed up the process of creating a legal framework for the launch of the digital euro. ECB President Christine Lagarde recently urged lawmakers to move faster, warning that delays could hurt Europe’s control over its own financial system.
The digital euro is envisioned as a virtual version of Europe’s single currency that people can use through online wallets. It would be a new form of money backed by the ECB and accessible to everyone in the eurozone. But to launch it, the ECB needs the support of European lawmakers—and so far, that support has been slow to come.
While the European Commission proposed a digital euro law back in June 2023, progress has been limited. Some members of the European Parliament remain hesitant, especially after a temporary failure in the ECB’s current payment system earlier this year. This raised concerns about whether the central bank can successfully manage a digital currency.
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Europe’s Financial Independence
Lagarde emphasized that having a digital euro is essential for Europe’s financial independence. She also warned that without it, the region could become too reliant on foreign digital currencies like stablecoins. These are private cryptocurrencies that are often tied to traditional currencies like the U.S. dollar. Stablecoins have been promoted by figures like former U.S. President Donald Trump but have proven risky in the past. One such stablecoin, TerraUSD, lost its dollar peg in 2022, causing a major market crash.
If approved, the digital euro would be offered by banks and digital wallet operators but guaranteed by the central bank. Each citizen would likely have access to a limited amount, potentially capped at around 3,000 euros.
However, the idea is not without its critics. Many banks across Europe are wary of the change. They worry that people might move their money from traditional banks to digital wallets backed by the ECB, especially during uncertain times. A study conducted by PwC for industry groups suggests that the digital euro could cost banks between 18 billion and 30 billion euros in infrastructure and operational upgrades.
Despite the challenges, the ECB remains committed to the project. A final decision could come as early as autumn, but only if lawmakers pass the necessary legislation in time. As the global race to digitize money accelerates, the ECB is keen to ensure that Europe is not left behind.
