The European Union‘s (EU) upcoming digital euro may face hurdles in non-euro member states, according to a review conducted by the European Parliament.
The report, produced by the Economic Governance and EMU Scrutiny Unit, potential challenges surrounding the use of the Central Bank Digital Currency (CBDC) in countries outside the euro area.
It claimed that an essential requirement for the widespread acceptance of the digital euro within the EU would be the ratification of international agreements between the EU and third-countries.
“Any arrangement between the ECB and a non-euro area national central bank would have to be preceded by an international agreement between the European Union and the third country.”
This shows the need for external agreements to facilitate the adoption of the digital euro across borders.
Erwin Voloder, head of policy at the European Blockchain Association, emphasized the need for data sharing agreements between countries in order to address the complications surrounding the use of CBDCs.
He pointed out that unresolved legal questions regarding usage, wallets, and jurisdiction pose significant challenges to the future implementation of the digital euro.
Voloder said that although there is generally a willingness within the EU to reach an agreement on the integration of a digital euro into the existing payment system, this endeavor will not be without technical and legal obstacles.
As , the European Central Bank (ECB) in 2021 announced the launch of the investigation phase of a digital euro project, which was intended to address crucial design and distribution aspects of the CBDC within the bloc.
The investigation is set to conclude in October, after which the ECB will decide whether to proceed with the next stage of development and testing.
More Countries Continue to Explore CBDCs
More and more countries and central banks around the globe have started exploring and testing their own digital currencies.
The People’s Bank of China is currently leading the pack. The country has launched numerous test pilots of its CBDC across various provinces, with over 200 million people already taking part in trials.
Other central banks, including the European Central Bank and the Bank of Japan, are also exploring the potential of CBDCs.
In total, 11 countries have fully launched a CBDC, which include , The Bahamas, , Anguilla, Jamaica, and seven Eastern Caribbean countries.
More recently, transport operators in Jamaica in using the country’s CBDC for payments.
It is worth noting that the United States is among the few countries that have no confirmed plans to launch a digital currency.
However, the country has been still moving forward on a wholesale (bank-to-bank) CBDC.