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Proposal for a
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REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
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on the establishment of the digital euro
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THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
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Having regard to the Treaty on the Functioning of the European Union, and in particular
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Article 133 thereof,
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Having regard to the proposal from the European Commission,
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After transmission of the draft legislative act to the national parliaments,
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Having regard to the opinion of the European Central Bank18,
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Having regard to the opinion of the European Economic and Social Committee19,
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Acting in accordance with the ordinary legislative procedure,
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Whereas:
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(1)
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The Commission emphasised in the Digital Finance and Retail Payment Strategies20 of
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September 2020 that a digital euro, as a retail central bank digital currency, would act
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as a catalyst for innovation in payments, finance and commerce in the context of
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ongoing efforts to reduce the fragmentation of the Union retail payments market. The
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Eurosummit of March 2021 called for a stronger and more innovative digital finance
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sector and more efficient and resilient payment systems. The Eurogroup also
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acknowledged, in its statement of 25 February, the potential of a digital euro to foster
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innovation in the financial system. In that context, both the European Parliament21 and
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ECOFIN Council22 welcomed in February and March 2022 the European Central
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Bank’s decision to launch a two-year investigation phase of a digital euro project,
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starting from October 2021.
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(2)
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On 2 October 2020, the European Central Bank published its “Report on a digital
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euro”23. The report formed the basis for seeking views on the benefits and challenges
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of issuing a digital euro and on its possible design.
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(3)
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Central bank money in the form of banknotes and coins cannot be used for online
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payments. Today, online payments rely entirely on commercial bank money. The
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acceptability and fungibility of commercial bank money rely on its convertibility on a
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one-to-one basis to central bank money with legal tender, which serves as a monetary
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anchor. That monetary anchor is at the core of the functioning of monetary and
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financial systems. It underpins users’ confidence in commercial bank money and in
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the euro as a currency and is therefore essential to safeguard the stability of the
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monetary system in a digitalised economy and society. As central bank money in
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physical form alone cannot address the needs of a rapidly digitalising economy, this
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could gradually remove the monetary anchor for commercial bank money. It is
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therefore necessary to introduce a new form of official currency with legal tender
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which is risk free and helps visualise the convertibility at par of the money issued by
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various commercial banks.
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(4)
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To address the need of a rapidly digitalising economy, the digital euro should support
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a variety of use cases of retail payments. Those use case include person to person,
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person to business, person to government, business to person, business to business,
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business to government, government to person, government to business, and
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government to government payments. In addition, the digital euro should also be able
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to fulfil future payments needs, and in particular machine to machine payment in the
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context of Industry 4.0 and payments in the decentralised internet (web3). The digital
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euro should not cater for payments between financial intermediaries, payment service
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providers and other market participants (that is to say wholesale payments), for which
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settlement systems in central bank money exist and where the use of different
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technologies is being further investigated by the Eurosystem.
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(5)
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In a context where cash alone cannot answer the needs of a digitalised economy, it is
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essential to support financial inclusion by ensuring universal, affordable and easy
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access to the digital euro to individuals in the euro area, as well as its wide acceptance
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in payments. Financial exclusion in the digitalised economy may increase as private
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digital means of payments may not specifically cater for vulnerable groups of the
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society or may not be suitable in some rural or remote areas without a (stable)
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communication network. According to the World Bank and the Bank for International
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Settlements, “efficient, accessible and safe retail payment systems and services are
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critical for greater financial inclusion”.24 That finding was further substantiated by the
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study on new Digital Payment Methods commissioned by the European Central Bank,
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which concluded that for the unbanked/underbanked/offline population, the most
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important features of a new payment method are easiness of use, not requiring
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technological skills, and to be secure and free of charge.25 A digital euro would offer a
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public alternative to private digital means of payments and support financial inclusion
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as it would be designed along these objectives, thus catering for free access, easiness
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of use and wide accessibility and acceptance.
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(6)
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The digital euro should complement euro banknotes and coins and should not replace
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the physical forms of the single currency. As legal tender instruments, both cash and
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digital euro are equally important. Regulation (EU) [please insert reference – proposal
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for a Regulation on the legal tender of euro banknotes and coins - COM/2023/364] would
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harmonise legal tender for cash and ensure that cash is widely distributed and effectively
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used.
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(7)
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Future developments in digital payments may affect the role of the euro in retail
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payment markets both in the European Union and internationally. Many central banks
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around the world are currently exploring the issuance of central bank digital currencies
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(‘CBDCs’) and some countries have already issued a CBDC. In addition, so-called
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third country stablecoins not denominated in euro, could, if widely used for payments,
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displace euro denominated payments in the Union’s economy by satisfying demand
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for programmable payments (which are referred as conditional payments in the context
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of this Regulation), including in e-commerce, capital markets or industry 4.0. A digital
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euro would therefore be important to maintain the role of the euro in the digital age.
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(8)
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It is therefore necessary to lay down a legal framework for establishing a digital form
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of the euro with the status of legal tender, for use by people, businesses and public
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authorities in the euro area. As a new form of the euro available to the general public,
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the digital euro should have important societal and economic consequences. It is
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therefore necessary to establish the digital euro and to regulate its main characteristics,
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as a measure of monetary law. The European Central Bank is competent to issue and
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to authorise the issuance of the digital euro by national central banks of the Member
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States whose currency is the euro, exercising its powers under the Treaties. On the
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basis of those powers and in accordance with the legal framework set out in this
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Regulation, the European Central Bank should thus be able to decide whether to issue
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the digital euro, at which times and in what amounts, and other particular measures
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