A purse with coins and banknotes. The European Central Bank (ECB) on Wednesday announced it is moving forward with the digital euro, a project that seeks to provide consumers in the eurozone with an alternative to cash and prevent rises in payment processing charges. (Jussi Nukari – Lehtikuva)
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PREPARATORY WORK on the digital euro is continuing.
The European Central Bank (ECB) on Wednesday announced it will launch a two-year preparation phase in order to finalise the rules of, choose private-sector partners for, and conduct tests and experiments with the mooted digital currency.
“After two years, the governing council will decide whether to move to the next stage of preparations, to pave the way for the possible future issuance and roll-out of a digital euro,” the monetary authority stated.
The digital euro is discussed because the use of cash is on the decline, increasing the reliance of consumers and businesses alike on the two largest payment processing networks in the world, Visa and MasterCard.
“In Finland, only a small share of daily purchases are made with cash, and less than 10 per cent of people say they use cash as their primary payment method,” Tuomas Välimäki, a board member at the Bank of Finland, highlighted in a news release on Thursday. “As the use of cash declines, we have to make sure that households continue to be able to pay with central bank-issued money in a digitalising world.”
“Even though the variety of payment alternatives may seem great to us, payments have become very one-sided. I can naturally pay electronically with my card, using either debit or credit, or make a mobile payment with, for instance, ApplePay. Despite the apparent variety of alternatives, all of these payments would go through the same Visa or MasterCard channels.”
Välimäki argued that although the companies provide effective and reliable payment systems, it is crucial not to allow such a critical societal function to become monopolised.
“In payments, just like in other functions, the existence of alternatives both increases reliability and prevents prices from increasing,” he said.
He said the digital euro would be available to all eurozone citizens and should be usable in the same circumstances as cash – to make a payment at a shop or between individuals – but also in e-commerce and other circumstances where the payer and recipient are not within arm’s reach of each other.
The digital euro has also received some criticism, with the banking sector and regulators concerned about its impact on deposits in the commercial sector and, even, about a possible bank run in times of crisis, wrote Reuters on Wednesday. The ECB has sought to assuage the concerns by indicating it would impose a cap on how much an individual may have in digital euros – likely around 3,000 euros.
The Finnish Commerce Federation on Thursday welcomed news about the project moving forward, viewing that the digital euro is needed to promote competition and lower the cost of retail payments.
“It would be good if there was a European alternative to the international digital payment methods because increased competition would lower costs for retail companies and ultimately also for consumers. At the same time, it would strengthen security of supply in payments,” commented Simo Hiilamo, the head of advocacy at the Finnish Commerce Federation.
“We also consider it important that the online functionality of the payment method is featured strongly in the development work.”
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
