Merchants should be obliged to accept digital euro - ECB's Panetta

Merchants should be obliged to accept digital euro - ECB's Panetta

Merchants should be obliged to accept a future digital euro as legal tender, whilst people and businesses should also be able to obtain the CBDC at their banks, says ECB executive board member Fabio Panetta.

As Europe moves seemingly inevitably towards the creation of a digital euro, Panetta has been appearing at the European Parliament's committee on economic and monetary affairs to discuss the project.

Panetta says that Europeans see the ability to pay anywhere as the most important feature of a potential digital euro.

He says that to ensure this, a digital euro could be given legal tender status in the same way that bank notes are.

"If introduced, the digital euro would be a public good, and Europeans would expect to be able to access and use it easily, anywhere in the euro area. So, it would be more beneficial and convenient for all users if merchants that accept digital payments were obliged to accept the digital euro as legal tender," says Panetta.

The move would have other benefits, making European payments more resilient, enhancing competition and reducing costs, he suggests.

On the other side of the coin, access, Panetta says that individuals and merchants will expect to be able to obtain digital euro at their banks, just like they do today with cash.

"It should be simple for people to start using the digital euro, and there should be no need to change bank in order to do so," he says.

However, in the face of mounting scepticism among EU nations, Panetta accepts that political opposition could effectively sidetrack or even derail the project.

"Throughout the next project phase, which is expected to be launched later this year, we will accommodate any necessary adjustments to the design of the digital euro that may emerge from legislative deliberations," he told MEPs. "The possible decision by the Governing Council to issue a digital euro would be taken only after the legislative act has been adopted."

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Comments: (1)

Jeremy Light
Jeremy Light - pingNpay - London 25 April, 2023, 11:24Be the first to give this comment the thumbs up 0 likes

This is policy trumping free markets.

CBDCs such as the digital Euro are as much a new payment system as they are a new form of money.

There are two approaches to introducing a new payment system - by dictat or by free markets.

If a CBDC is introduced by dictat, it is hardly a 'public good', more an imposition. Especially with the statement a digital euro makes 'European payments more resilient, enhancing competition and reducing costs'. This sounds great and pro-free markets but it is just propaganda without real evidence of market demand and market-driven problem solving and solutions.

The reality is introducing new payment systems for ubiquitous use is hard, very hard. Policy is unlikely to get it right by imposition. 

Instead, policy should be an enabler for the free markets - create a CBDC by all means, preferably wholesale so it can be used as a new form of settlement collateral instead of reserves, but allow private enterprise to innovate with it, sinking or swimming on their ability to meet the market needs. Otherwise, policy will just sink.