The EACB position paper addresses the new package of legislative proposals including a proposal for a Regulation on the establishment of the digital euro published by the European Commission on 28 June 2023.
While the EACB understands the need to discuss and reflect on the topic of a digital euro for Europe as mentioned in our earlier position paper, we call on legislators to revise the main legal fronts that are cause for concern. Indeed, it is highly doubtful whether the general policy objectives will be reached with the proposed design of the digital euro.
First, it remains unclear what long-term effects the digital euro will have on the diversity of the banking system and economy. As such, we strongly recommend rigorous impact assessments to fill this knowledge gap, particularly as regards the impact on deposit-depending institutions such as cooperative banks.
Second, further reflection should be given to the mandate of the ECB and its approach to liability and accountability. If the proposed Regulation were left as it stands, it would give the ECB the final say on many key design aspects of the digital euro, and after the issuance of the digital euro, the ECB will de facto become competitor with private market actors. An enhanced system of checks and balances should control this accumulation of powers. However, the Commission’s proposal does not provide for a future-proof and balanced system of governance, controls and accountability.
Finally, we alert on the proposal’s potential to distort competition by forcing governmental price settings. The increased costs banks will face from the implementation of the digital euro and the expected outflow of deposits will have a significant negative impact on cooperative banks, the EU financial system and economy as a whole. These substantial costs should be accounted for with an adequate pricing methodology and sustainable business model.
In conclusion, the EACB highlights the numerous unanswered questions surrounding the digital euro project. We still have concerns and reservations towards the digital euro project. Against this background, we recommend revaluating the proposal design.