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BRUSSELS, Belgium – On Wednesday, the European Commission unveiled its legislative proposals aimed at establishing a digital euro, with the goal of enabling cost-free digital payments for European citizens throughout the currency area.

The recently reviewed text, which CoinDesk had access to two weeks ago, incorporates measures to protect privacy and ensure financial stability. However, numerous stakeholders are already expressing doubts regarding the advantages of the prospective central bank digital currency (CBDC).

In a statement published on the EU executive's website on Wednesday, Valdis Dombrovskis, the Executive Vice President of the European Commission, emphasized the "strategic advantages" brought about by the central bank digital currency (CBDC).

“A digital euro would also enhance the integrity and safety of the European payment system at a time when growing geopolitical tensions make us more vulnerable to attacks to our critical infrastructure,” be available “to everyone, everywhere, for free,” and could stimulate innovation and competition in a market dominated by a few major players, mostly from the U.S., said Dombrovskis in the post co-authored with European Central Bank’s (ECB) Executive Board Member Fabio Panetta.

During a press conference held on Wednesday to unveil the plans, European Commissioner Mairead McGuinness expressed her anticipation for the ongoing and escalating discussions surrounding the digital euro. However, she also expressed her optimism that the additional possibilities offered by a digital euro, such as its potential utilization in remote rural areas, could convince those who are skeptical about its implementation.

“Somebody falling in love with digital currency is stretching it,” said McGuinness, the commission’s most senior financial services official, pulling a wad of banknotes out of her pocket. “It's easier to talk about cash because it's tangible.”

The legislation itself does not directly establish the digital euro, as it ultimately depends on the decision of the ECB to issue the Central Bank Digital Currency (CBDC). Advocates emphasize that the government-backed digital currency provides capabilities that private payment methods may not always offer, such as facilitating transactions between acquaintances and implementing stronger data protection measures.

However, despite the central bank's years of technical efforts, numerous individuals, including certain lawmakers and governments responsible for approving the commission's new bill, remain perplexed.

Moreover, the initiative has encountered skepticism from commercial banks as well. They view the state-backed currency as a direct competition to their own digital payment systems and, potentially, even as an alternative to traditional savings accounts.

“Alongside the main features of a digital euro, it is important to discuss the broader questions about its added value,” stated Wim Mijs, CEO of the European Banking Association, a lobbying organization. He emphasized the necessity of establishing strict restrictions on the amount of digital euros that can be held and the transactions that can be conducted, in order to prevent a mass exodus of deposits from traditional banks.

In a statement released on Wednesday, the ECB expressed its appreciation for the commission's proposals and announced its intention to assess whether to proceed to the next stage of its project during the autumn.

“The euro is the most tangible symbol of European integration,” said ECB President Christine Lagarde in a statement to the press. "We look forward to continuing working together with other EU institutions towards a digital euro to ensure our currency is fit for the digital age.”

The legal proposals aim to guarantee the offline usability of the digital euro, providing a level of privacy comparable to physical cash. It explicitly prohibits the CBDC from being "programmed" to restrict its usage for specific goods, although officials state that it could still support conditional payments, such as monthly utility bills or more intricate smart contracts.

Source Coindesk