2023/0212/COD: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the establishment of the digital euro

Following years of discussion and experimentation as regards the introduction of a Digital EURO in the EU, the European Commission has published a proposed new regulation, the so-called Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the establishment of the digital euro. In this draft version, the Commission seeks to create the basic framework for the introduction of a Digital EURO the creation and distribution of which has not yet been decided upon by the European Central Bank (ECB). It is part of an entire series of draft regulations and directives aimed at establishing a single currency framework.
Specifically, the new regulation covers relevant issues surrounding the introduction of a new Digital EURO, ranging from the creation of such EURO, to the distribution of such within and outside the EU, to the legal tender status of the currency, to obligations of payment service providers in relation to the introduction of the currency. Some of the key provisions of the regulation are briefly outlined below. For detailed, comprehensive information, please refer to the original draft version.
#### Key provisions outlined in the new draft regulation on a Digital EURO
(1) Applicability of existing payment and other regulations to a new Digital EURO: The proposed regulation specifies that existing EU directives and regulations related to payment services, cross-border payments, anti-money laundering, and fund transfers (e.g. Directive (EU) 2015/2366 – the Payment Service Directive 2 (PSD 2) or Directive (EU) 2015/849 – The 4th anti-money laundering Directive) would also apply to the Digital EURO. Competent authorities designated under these directives and regulations would be responsible for supervising and enforcing the obligations outlined in the new regulation.
(2) Creating legal tender status and defining payment methods: The Digital EURO will be granted legal tender status, meaning it must be accepted by payees, unless certain conditions are met or the exceptions outlined in the regulation apply. Specifically, microenterprises will not be required to accept the digital currency, if they accept „comparable“ digital payment methods. Similarly, individuals engaged in personal activities are not obligated to accept the Digital EURO. Also, if both the payee and the payer agree on a different form of payment prior to the transaction, the Digital EURO does not need to be accepted, regardless of the situation (commercial, private transactions).
(3) Limitation on (wallet) holdings: At least at the beginning, there will be limits on the Digital EURO that may be held by both legal and natural persons – the limits will have to be defined by the European Central Bank. In case a user has multiple Digital EURO accounts across various payment service providers, there will be an overall limit for the aggregate of all account totals.
(4) Fees and charges relating to the provision of basic services relating to a Digital EURO: Institutions providing basic services to natural persons such as the opening, holding, or closing of corresponding payment accounts, conversion of the Digital EURO from and into cash, or the transfer of Digital EURO balances would have to be provided free of charge. A list of affected services for which fees may not be charged to natural persons is included in the Annex to the proposed new regulation. This limitation or prohibition, however, does neither apply to legal persons, nor does it apply to merchant service charges or inter-payment service provider fees.
(5) Use of a Digital EURO outside the EURO area: According to the draft, the Digital EURO could be used in both member states that do not currently have the EURO as a payment method and in third countries. In either case, a number of prerequisites would have to be met such as the establishment of a monetary agreement between the ECB and the local Central Bank (CB) which would specify all relevant terms for the use of the Digital EURO (terms on the access to the currency, terms on the currency conversion) or the non-listing of the third country on any of the FATF lists.
(6) Specification of technical features: The draft would outline some basic technical features of the new Digital EURO, including some core functional requirements (its services are ease to use; accessibility to all relevant persons needs is ensured, including those with disabilities or limited technical know-how; facilitates both offline and online Digital EURO payment transactions; etc.).