Fabio Panetta, a board member of the European Central Bank (ECB), has stated that the digital euro is crucial as people increasingly use digital currencies, and there is a possibility that cash will eventually become obsolete. Panetta, who is leading the ECB’s central bank digital currency (CBDC) project, stated in an interview with Les Echos that it would be imperative for people to continue using a currency backed and issued by a central bank in such a scenario.
The Necessity for a Digital Euro
Panetta stated that the central bank could not run the risk of central bank money no longer being used, hence the need for a digital euro. However, he clarified that the digital euro was not intended to replace conventional cash banknotes, and the ECB would continue to issue them as long as there was a demand for them. Panetta added that the ECB would ensure that the digital euro had no adverse impact on the banking system.
The digital euro project would likely launch in three to four years if all stages of the process go smoothly, according to Panetta, who is leading the development of the digital euro, with 50 people currently working on the project. The European Commission (EC) is preparing legislation to establish a regulatory framework for the CBDC, with the legislative proposal expected to be presented in June. Once in place, the Governing Council will consider whether to launch a preparation and testing phase in October.
If all member states agree, the testing phase is likely to take two to three years, with a launch window for the digital euro at around three to four years.
Privacy Concerns Addressed
Many people in the industry are worried that CBDCs, specifically the digital euro, will enable central banks to infringe on the financial privacy of citizens and allow governments to impose spending restrictions. Panetta addressed these concerns, stating that the ECB would not have access to personal data. Personal data and information would only be provided to financial intermediaries who have no obligation to share it with regulators.
Panetta stated that while data and identity privacy concerns are necessary to combat illegal financial activities, there needs to be a balance between preserving confidentiality and fighting illicit financial activity. Panetta added that the legislator would determine this balance. In current discussions, some prioritize confidentiality, while others prioritize the fight against illegal activities.
Panetta believes that the digital euro is necessary as people increasingly use digital currencies, and there is a possibility that cash will one day become obsolete. He believes it is vital that people continue to use a currency backed and issued by a central bank. Although the digital euro is not intended to replace conventional cash banknotes, it is essential to ensure that central bank money is not at risk. Furthermore, the ECB will ensure that the digital euro has no adverse impact on the banking system and that citizens’ financial privacy is protected.