Spain’s central bank has joined the long list of European banking institutions trying to sell the forthcoming digital euro to the public. According to the Bank of Spain, electronic payments will become a “vital” part of the financial system once the European Union rolls out a central bank digital currency (CBDC).
The physical cash format “does not allow to exploit all the advantages offered by the growing digitalization of the economy and society,” Spain’s central bank argues in a short text, published last week.
The myriad benefits of a digital euro
The bank also envisions a future where the digital euro will facilitate offline payments, offering the same level of privacy as cash transactions. While online transactions would create a data trail, they would only be shared with the user’s financial institution and not the Eurosystem, the CBDC’s infrastructure provider.
Notably, the Bank of Finland had previously echoed similar sentiments, with board member
Tuomas Välimäki described the digital euro as “the most topical project” in the European payment sector. The European Central Bank has also been endorsing its proposed digital euro, saying it will lead to an “easier life” and a “stronger Europe.”
EU’s CBDC plans enter the next phase
The report comes on the heels of the ECB’s announcement that it was moving its digital euro project to the next phase. As per the project calendar published in the text published by Spain’s central bank, the “preparation phase” will begin next month and conclude in 2025.
However, the ECB has yet to decide whether to issue a CBDC after the so-called preparation phase is completed. The proposed digital euro has raised privacy concerns, with many arguing the government could use the digital currency as a surveillance tool.
Data watchdogs stress on privacy safeguards
In light of this, European Union data protection regulators last week called for enhanced privacy measures in the digital euro. In May, the EU Council members approved the Markets in Crypto-Assets (MiCA) legislation in an attempt to regulate the once-free wheeling crypto industry.
Indeed, MiCA provides the much-needed regulatory clarity around digital assets. On the other hand, it also raises question marks around its potential impact on privacy and innovation. Furthermore, the EU’s stablecoin regulations have stoked fears that it could limit crypto adoption in Europe.
