In a statement about the digital euro yesterday, the Eurogroup said it does not support a potential digital euro being programmable money. The Eurogroup is made up of the Finance Ministers of European countries that have adopted the euro as currency.
It clarified its definition of programmable money as having restrictions on what the money can be spent on or time limits on when the digital currency can be used. However, it’s happy with users being able to make payments automatically when certain conditions are met.
The statement says the “digital euro should at all times and throughout the euro area be convertible at par with other forms of the euro, such as banknotes and commercial bank deposits. The digital euro therefore cannot be a programmable money.”
In contrast, several other countries are exploring central bank digital currencies (CBDC) to include programmable money functionality, especially for government benefits. For example, Singapore is trialing ‘purpose bound money‘ as part of its Project Orchid retail CBDC initiative. It views the money as similar to a voucher which could be a government voucher or even a private gift certificate. In Brazil, one of the CBDC trials focuses on supporting farmers and restricting agriculu lending to be used for farming goods.
Coming back to the Eurogroup, it sees its role as providing political policy input for the digital euro. It is part of the European Council, made up of the European country heads of state, which has a say in any potential CBDC legislation passed alongside the European Parliament. It reiterated that digital euro legislation would be proposed in the first half of this year.
The Eurogroup outlined other features it wants to see in a potential digital euro. Privacy is worth highlighting. Unsurprisingly, it wants to provide privacy but also ensure compliance with AML, tax laws and sanctions. The two invariably trade off, but whereas the ECB has proposed monetary and transaction limits based on the level of identity, the Eurogroup proposes more privacy for less risky transactions.
Other desirable digital euro features include:
- complementing rather than replacing cash
- safeguarding financial stability
- ensuring pan-European reach
- appropriate regulatory measures
- interoperability with the CBDCs of other countries.
Meanwhile, the ECB is forging ahead with its digital euro research. It recently invited technology providers to provide estimates as part of its market research for planning a potential ‘realisation phase’. In the autumn, there will be a decision on whether to progress to that phase, which is different from confirming the launch of a CBDC.
