According to European Union (EU) officials, a retail digital euro will initially only allow payments started by individuals and won’t allow businesses to settle invoices, pay employees, or be used for decentralised financing.
The union has not yet decided whether it will deploy blockchain technology similar to bitcoin or perhaps issue a central bank digital currency (CBDC). A law, however, is scheduled to be released early in the next year to enable the digital replacement for currency.
At an event hosted by the European Economic and Social Committee (a body that advises the EU government), Evelien Witlox, the manager of the European Central Bank’s digital euro programme, expressed his opinion that other potential uses of the CBDC, such as the payment of wages, business settlements, payments initiated automatically by machine, and the functionality needed to support decentralised finance, could still be taken into consideration in a later stage.
Peer-to-peer payments that facilitate exchanges among family and friends, consumer-to-business payments in brick-and-mortar or online establishments, and payments to or by governments, according to her, will be the three initial applications.
She added that officials will first take into account the requirements of the system to be secure and have enough throughput before deciding whether or not to employ blockchain as a technology.
Before confirming the start of development in September 2023, central bank officials still need to determine their positions on matters like how transactions with a digital euro will be settled and how intermediaries will be reimbursed.
European Commission officials, who are in charge of submitting proposed regulations that could support a digital euro, want the CBDC to be future-proof and compatible with Web3, but they seem to agree that there is no rush.
The event also featured Jan Ceyssens, head of the commission’s division of digital finance. Decentralized finance applications, he claimed, are just another trend that, while they may be anticipated to gain traction in the future, they are not yet a reality.
However, the sector has cautioned that the ECB’s methodical approach could endanger the entire strategy. Some past CBDC ventures failed because they did not enhance the current situation, which allows consumers to conveniently pay with cash and cards.