The European Union is developing the digital euro that can be used for making payments with a phone instead of in cash. According to the plan, in the future the digital euro can also be used for paying in the situations where card payments do not work. It can be used in e-shops as well instead of the various payment solutions provided by private sector.
At its today’s sitting, the European Union Affairs Committee of the Riigikogu (Parliament of Estonia) discussed Estonia’s positions on the proposals to adopt the digital euro and agreed with the Government that before the adoption of the digital euro, political and legal risks as well as fair division of costs had to be thoroughly analysed.
Chair of the European Union Affairs Committee Liisa Pakosta thinks that the digital euro initiative is necessary and also meets the expectations of young people for a modern payment instrument. She pointed out that in the history of money, the adoption of the digital euro was in the same way a natural change that raised many questions as the transfer from gold coins to metal coins, whose value was guaranteed by means other than the value of material.
“More thorough preparation is essential, but we as the national parliament gave a mandate to proceed with the developing of the digital euro. In the current complicated security situation, the adoption of the digital euro is important for the people of Estonia in preparing for crises. Cash is not safe in every situation and ATMs do not work during power cuts. The digital euro can be transferred from a person’s bank account to the digital euro app on their phone, like storing cash, and it can be used offline, or when there is no internet or card payments in shops are not working,” the Chair of the Committee said.
Pakosta emphasised that in its positions, Estonia pointed out among other things that before the adoption of the digital euro, it was necessary to properly analyse its impact on banks, financial stability and consumer rights. “At present, consumers do not pay for the use of cash, and this must also remain so with digital cash, or the digital euro. Of course, much better security must be ensured than there is today for the use of cash,” she stated.
In the opinion of the member of the Committee Aleksei Jevgrafov, it is important that the digital euro will make people’s life simpler. “It is inconvenient for the consumer that different e-shops require using all kinds of different payment services, from Google Pay to Paypal and Revolut. The digital euro will solve this problem because digital euro account can be used instead of different wallets and the customer will not be asked a service charge for that,” he said. “It is also very welcome that there will be no need to go looking for cash when card payments do not function.”
It was pointed out at the sitting that the introduction of digital cash and the accompanying public infrastructure would contribute to the obligation of the Bank of Estonia to provide an essential service. According to the plan, the use of the new payment instrument will be mandatory for banks and free of charge for consumers. It was also mentioned at the sitting that digital euro payments can be pre-recorded on the phone and that payments of up to 500 or 1000 euro would not be traceable. A limit will be set to large transactions to prevent money laundering and financing of terrorism. A balance will be sought between safety and privacy when setting the rules.
It was also noted at the sitting that it was intended to use the digital euro initially in the euro area countries, but in the longer term it could also be possible to use it outside the European Union, and other currencies could be kept in the digital wallet alongside the euro. The adoption of the digital euro is expected to take place between 2027 and 2030.
Adviser of the Financial Services Policy Department of the Ministry of Finance Kadri Martin and Head of the Payment and Settlement Systems Department of the Bank of Estonia Rainer Olt participated in the discussion of this agenda item.
The European Union Affairs Committee, in line with the opinion of the Finance Committee, decided to approve the Government’s positions on the proposals of the European Commission on single currency, including the proposal on the digital euro.
For more information, please contact: Liisa Pakosta, phone +372 502 6191
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