According to a document published by the European Central Bank (ECB) on its website, a digital Euro should prioritize online purchases and making payments among friends. The document featured a slideshow presentation from the board’s recent meeting.
The document says that the other use cases of the digital Euro like paying taxes, receiving welfare payments, or even paying in physical stores would only follow in a later, second tranche of developments.
Currently, the ECB is one of many global jurisdictions evaluating whether to issue a CBDC. It is scheduled to take a formal decision later this year. However, its officials are already thrashing out technical options, and say that it will need to have multiple applications to address user needs and market gaps.
The document published by the ECB’s digital Euro team stated:
“In practical terms, a staggered approach would contribute to ensure a smooth end-user payment experience and reduce the implementation complexities of trying to roll out new systems all at once.”
Reportedly, the first release of the European CBDC would be for e-commerce and for peer-to-peer payments made among individuals as stated in the document. The bank executives previously stated that use cases like paying salaries, or applications that could align with decentralized finance should be brought into the system in the long run and must be considered only in a later phase.
Another document from the same meeting stated that using the digital Euro for private individuals should be free for basic applications like onboarding and making payments. However, it added there could be new laws to discourage banks from charging merchants too much for use.
According to the second document, the payment service providers would be able to charge merchants but the twist is that legislation might impose conditions on merchant pricing. As published in the document:
Payment service providers would be able to charge merchants but legislation might establish an expectation on merchant pricing considering the current levels for comparable retail payment solutions.
This broadly reflects the current arrangement of cash management wherein European Union laws known as the Single Euro Payments Area and Interchange Fee Regulation limit the charges that banks and card operators can make for bank transfers and credit card payments.
In the Eurogroup discussion that took place in January, it was highlighted that the digital Euro should complement cash rather than replace it, be recognized as legal tender, and guarantee a high degree of privacy.
The group also stated that the CDBC should ensure consumers in the euro region access central bank funds and that its architecture should consider environmental considerations. As per the document released by the ECB on its digital retail currency in December, credit institutions and payment service providers will manage services related to a digital Euro issued by the organization.