The European Commission (EC) has released a framework for a digital identity scheme for all citizens, residents and businesses in the European Union (EU), allowing anyone in the bloc to prove their identity, share electronic documents and access online services from any device.

The European Digital Identity would allow EU citizens to access public and private services anywhere in the bloc as easily and conveniently as they would in their home country, whether that’s renting a flat, opening a bank account, enrolling at a European university, or checking in at the airport.

End-users would use digital wallets offered by their member states to store identity documents and other attributes including driving licenses, diplomas and bank accounts. These wallets may be provided by public authorities or by private entities recognized by the member state, the EC said.

The European Digital Identity should have three main characteristics: first, it should be available to anyone wanting to use it; second, it should be widely usable as a way either to identify users or to prove certain personal attributes to access public or private digital services; and finally, it should provide end-users with full control over their data, the EC said.

Though not mandatory for EU residents, dominant online platforms such as Google and Facebook would be required to accept an EU digital wallet, Margrethe Vestager, the European Commission’s executive vice president for digital, said during a virtual media briefing, a provision that aligns with the EC’s goals to regulate bigtechs, notably over data privacy concerns.

“Because of that, you can decide how much data you want to share – only enough to identify yourself,” the commissioner said.

The EC is asking member states to establish a common toolbox by September 2022 so that pilot projects can begin. The toolbox should comprise the technical architecture, standards and guidelines for best practices for the digital identity scheme, and member states should “start the necessary preparatory work immediately,” the authority said.

The EC 2030 Digital Compass

The European Digital Identity is part of the EC’s 2030 Digital Compass strategy and the bloc’s broader digital ambitions. These include having 75% of EU companies taken up cloud computing, artificial intelligence (AI) and big data by 2030, 100% online provision of key public services available for European citizens and businesses, all citizens having access to electronic medical records, and 80% of citizens using digital identity.

Europe’s Digital Decade: digital targets for 2030, Source: European Commission

In parallel, the EC and the European Central Bank (ECB) have been contemplating the introduction of a so-called digital euro.

The central bank digital currency (CBDC) would complement cash and payment solutions supplied by the private sector, and could potentially help accelerate the digitalization of the economy, support improvements in the overall costs and ecological footprint of the monetary and payment systems, improve existing cross-currency payment infrastructures, and better service users with changing behaviors and expectations, according to an October 2020 report by the ECB.

In a recent interview with the Financial Times, Fabio Panetta, an executive board member at the ECB, said that one of the project’s key aims would also be to combat the spread of digital coins created by other nations and companies.

“If the central bank gets involved in digital payments, privacy is going to be better protected … because we are not like private companies. We have no commercial interest in storing, managing or monetizing the data of users,” Panetta told the media outlet.

“Of course there is the potential threat that could come from others issuing a digital means of payment … If people do want to pay digitally and we do not offer them a digital means of payment, somebody [else] would do that.”

Around the world, CBDC engagement and development have accelerated over the past year amid the COVID-19 pandemic, and many central banks are now moving into more advanced stages in their efforts. Latest research by the Bank for International Settlements (BIS) found that about 60% of central banks are conducting experiments or PoC projects, up from 42% in 2019, while 14% are moving forward to development and pilot arrangements.

The EU has yet to officially decide whether or not it will be issuing a so-called digital euro, though a number of countries part of the bloc have been researching and experimenting with CBDC individually.

Banque de France is currently testing the use of a CBDC for the wholesale market. It announced earlier this month a partnership with the Swiss National Bank to start a joint cross-border CBDC experiment dubbed Project Jura.

Sweden, which is part of the EU but which hasn’t adopted the euro, completed the first phase of the e-krona pilot in April 2021. In that phase, the digital currency was token-based in a distributed network based on blockchain technology.

Featured image: (L-R) Margrethe Vestager, Executive Vice-President for a Europe Fit for the Digital Age and Thierry Breton, Commissioner for Internal Market

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