Digital Euro: ECB Considers Fees And Other Conditions For Adoption In Europe
Alicia Maher
3 min read
As the world prepares for the inevitable switch to an economy that is powered by digital assets, central banks and other financial institutions are making it their duty to research digital assets and prepare for their adoption. The European Central Bank (ECB) is exploring its options and researching the best way to go about launching and adopting its CBDC, the Digital Euro.
In a recent paper, the ECB explored concepts, structures, and frameworks for the success of its CBDC when it launched. The report is a part of ongoing efforts to provide a safe landing for the project when it is deployed for its pilot phase next year. The ECB had earlier hinted that it would begin trials of the Digital Euro in 2022.
Among its considerations are fees and cost structures. The report noted that the fee and cost recovery structure of the Digital Euro will impact its sustainability. Digital assets are quite different from physical assets and the fundamental difference is the lower costs of minting and maintenance. This does not imply an absence of costs in CBDCs.
The authors of the paper observed that merchants are not usually charged fees for certain cash transactions, but that could change with the use of CBDC. Yet, considering the lower costs of running CBDC, the per-transaction fees must be defined only after extensive analysis of the asset and guiding policies.
The report also noted that whatever policies are implemented must protect the consumers from unwarranted risks and costs.
The Tripod of Success
The ECB’s report also noted three important factors that will determine the success of the Digital Euro. These are a ready market for utilizing CBDC for transactions, legal adoption and backing from countries, and rewarding select intermediaries for the project.
The ECB rightly identified those three as important to the success of its CBDC. For any currency to retain value, it must have a ready market and spending power. Yet, security and privacy is also an issue that must be addressed if a ready market will be there. Europeans have previously spoken against the planned Digital Euro as it could end up violating certain consumer privacy.
But the ECB addressed this, saying that it would never sell consumer data. The apex bank also said that it would only retrieve data that is the “minimum” for facilitating secure and easy payments on its platforms. It also said that the adoption of CBDC would stimulate banks to offer better services to clients; a win-win situation, it said.
Toeing China’s and Nigeria’s Footsteps
China and Nigeria, two of the most populous nations on earth and also two countries with the most interest in digital assets, announced the launch of their respective CBDCs in September and October respectively. Both countries said that they launched their CBDCs to power the economy as the world moved towards digital asset systems.
They also claimed to have figured the optimal conditions for deploying the assets and ensuring the integrity of their respective economies while removing the barrier to global financial communication.
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