Author: Brian McGleenon, The Block; Translation: Song Xue, LianGuai
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The legal and technical complexities of the European Central Bank’s digital euro project have been identified.
An examination by the European Parliament has revealed that the digital euro may face challenges in non-eurozone countries.
A report from the Economic Governance and European Monetary Union Review Department highlights the challenges faced by non-eurozone member states in using CBDC. The most significant of these is that the currency acceptance of the digital euro by the entire European Union requires approval through international agreements between the EU and third countries.
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The report states, “Any arrangement between the European Central Bank and non-eurozone national central banks must be subject to international agreements between the EU and third countries.”
Complex legal issues
After reviewing the report, Erwin Voloder, Policy Lead at the European Blockchain Association, pointed out, “CBDC is a closed-loop data cycle that requires at least a minimum data sharing agreement between countries.”
“There are complex legal issues related to usage, wallets, and jurisdiction, and so far there are no viable solutions, which will be the biggest challenge in the future,” added Erwin Voloder.
The economist stated that there is a general political willingness within the EU to reach an agreement on how the digital euro can function within the existing payment mix. However, he noted that without further clarification on the operational challenges at the technical level and monetary law level, none of this will be realized.
In July 2021, the European Central Bank’s Governing Council initiated the investigation phase of the digital euro project. The investigation phase aims to address key questions regarding the design and distribution of the CBDC. The project is expected to conclude in October this year, at which point the ECB will decide whether to proceed to the next phase of development and testing.
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