During a speech this week, Dr Joachim Nagel, President of the Deutsche Bundesbank, implied that Europe’s central bank digital currency (CBDC) will launch in 2028/2029. Previously 2026 was mentioned as a potential digital euro launch date by European Central Bank (ECB) President Christine Lagarde, former ECB Director Fabio Panetta, and François Villeroy de Galhau, the Governor of the Banque de France.
The ECB made a decision to progress to the two year preparation phase on schedule in October 2023.
However, this week Dr Nagel said, “A digital euro won’t be introduced any time soon. It may take another four or five years before it is actually implemented.”
So why the delay? A CBDC needs the approval of parliament. Parliament recesses tomorrow for the June elections, and the balance of power could shift after that. There’s no digital euro legislation on the agenda for voting this week. Last year another Bundesbank board member, Burkhard Balz, observed, “If not completed, the legislative procedure will start again from scratch with the new Parliament.”
As it turned out, the first draft was published last June. Initially there was considerable conservative pushback.
However, two parliamentary committees heard an amended draft this February, with the European Committee on Civil Liberties and Justice (LIBE) voting in favor. Given that privacy and civil liberties are contentious issues for the digital currency, the favorable vote indicated a good chance the legislation would have passed in the current parliament. But who knows what might happen in the next one?
Hence, 2025 is the earliest date for legislation. That will likely delay development because the legislation will impact the digital euro’s design.
Dr Nagel says a digital euro is good for all
During his speech Dr Nagel outlined the reasons he believes a digital euro can be good for all parties. For consumers it offers a digital means of offline and online payment which is safe, free and usable throughout the euro area. Banks can use the digital euro as a base for innovation and need not fear deposits migrating to the CBDC. Dr Nagel argued that’s because users won’t earn interest on digital euros and there will be holding limits.
One of the biggest beneficiaries could be merchants. “Today, retailers often feel obliged to offer their customers a variety of payment solutions, some of which are quite expensive,” said Dr Nagel. “The digital euro would increase competition in the payments market. Merchants could negotiate lower transaction fees with private payment service providers.”
An even bigger benefit for merchants is they would receive payments instantly.
