How will the new digital euro work?

The European Commission wants a digital euro for all EU citizens. This digital currency should ensure privacy and financial stability. The ECB is positive about the first proposal, but how will this digital coin work?

Yesterday, June 28, the European Commission published a legislative proposal on the functionality of the digital euro. The CBDC (Central Bank Digital Currency) should allow Europeans to make free digital payments in all Schengen countries.

The proposal also includes rules on privacy and financial stability. CBDCs are controversial in the crypto community. Some praise them as a low-cost alternative to international payments, but most fear for their privacy and view China's social credit system with suspicion.

In a statement, Executive Vice President Valdis Dombrovskis said that CBDC's "strategic advantages" should deliver. A digital euro would also improve the integrity and security of the European payment system, he added. The European Central Bank welcomes the European Commission's proposals. In the fall, the ECB Governing Council will decide whether the digital euro will proceed to the next planning stage.

Meanwhile, FranK Schäffler, a member of the Bundestag, voiced criticism. He told German BTC-ECHO: "The ECB has not yet adequately explained where the benefits of a digital euro lie for the citizens of Europe. So far, the payment system is working well. There are enough private providers for that."

The FDP politician also warned, "Should there be a digital euro, it should not displace cash, allow anonymous payments, or create new risks for the financial system. Ultimately, a digital euro is an operation on the open heart of our monetary system. We must proceed very carefully here."

The CBDC should be used as a national means of payment throughout the euro zone and provide an alternative to cash.