ECB says digital euro will focus on personal use

Head of European Commission’s digital finance unit describes how a digital euro could interact with Web 3.0


The retail digital euro will primarily focus on interpersonal transactions, officials from the European Central Bank (ECB) and European Commission have said.

According to Coindesk, Evelien Witlox, the ECB’s digital euro programme manager, said that the three immediate use cases singled out by the central bank are peer-to-peer payments between individuals, payments to or by governments, and consumer-to-business payments.

The introduction of a central bank digital currency (CBDC) could substantially affect the nature of the European economy and life in general. The ECB is by no means alone in developing a digital version of a state-issued currency.

While some central banks have championed CBDCs primarily for making interbank transfers more efficient, others have prioritised the development of retail CBDCs, with a particular focus on interpersonal transactions. 

Witlox, speaking at an event hosted by the European Economic and Social Committee, said she recognised that a digital euro could eventually be used for inter-business transactions and support the burgeoning field of decentralised finance (DeFi). 

She said: “Whether or not blockchain will be used as a technology is currently not in the investigation phase… Technology should not drive the functionality.”

Although the European Union and ECB have not yet decided on whether to issue a CBDC or even what form it could take. Witlox said that ECB officials will decide before September 2023 how transactions with a potential digital euro will be settled and how intermediaries will be compensated, when the start to development is finalised. 

CBDCs and Web 3.0

At the same event, Jan Ceyssens, the head of the digital finance unit at the Commission, discussed how a digital euro could interact with Web 3.0, the new iteration of the internet that incorporates tokenisation, decentralisation and blockchain. 

Ceyssens said: “A digital euro needs to meet new payment needs. We need to also be open and adjust and cater for those [Web 3.0] users.

He said that decentralised apps "are more trends which may be expected to take room in the future… they are not the reality today.”

Privacy concerns

In August, the ECB described CBDCs as the “only solution” for the “smooth continuation” of the existing monetary system. 

The bank said it recognised the privacy concerns raised by those concerned with granting central banks and government greater oversight and insight into how individuals use their money. However, it noted that consumers already “tend to give away their data for free, or in exchange for very small rewards in practice.”  

Critics of CBDCs are not limited to privacy campaigners. The President of the Federal Reserve in Minneapolis, Neil Kashkari, said that CBDCs give the issuer the ability “to monitor every one of your transactions”, to impose negative interest rates and to directly tax customer accounts.

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