A digital euro would be like euro banknotes, but digital. It would be an electronic form of money issued by the Eurosystem (the ECB and the national central banks of the euro area). According to the European Central Bank (ECB), it would be accessible to all citizens and firms.
conference on a digital euro plan was held at the National College of Ireland
in Dublin. It was addressed by Dr Fabio Panetta, a member of the Executive
Board of the ECB.
digital euro would fortify our monetary sovereignty and provide a form of
central bank money for making daily digital payments across the euro area, just
like cash for physical transactions. To succeed, a digital euro will need to
add value for users, foster innovation, and enjoy strong political and societal
went on to say that central banks provide a stable monetary base on which
intermediaries such as banks build new payment and financial services. This
coexistence has been a powerful driver of stability and innovation.
digital disruption and the declining use of cash – the only form of sovereign
money currently available to the public – are threatening to upend this
balance,” he said. “Consumers are increasingly turning towards
non-cash payments. Only 20% of the cash stock is now used for payments, down from
35% fifteen years ago.”
to him, the European Central Bank will always ensure that cash remains
available. Still, cash could lose its central role and its ability to provide
an “effective anchor” in the future as consumers turn to digital
means of payment.
addressed cryptocurrencies and so-called stablecoins. According to him,
recent developments in the market for crypto-assets illustrate that
“private instruments” cannot act as money when they cannot be
converted at par into public funds at all times.
“Confidence that “one euro is one euro” whatever form it takes rests on our ability to convert, at par, private money – such as funds held in bank deposits or digital wallets – into public money, which is the safest form of money available,” Panetta explained.
that cryptocurrencies are too risky to act as a reliable means of payment.
“Anyone investing in cryptos must be prepared to lose all their
investment.” To mitigate these risks, stablecoins have emerged and “become
globally systemic, especially if issued by big techs.”
while the value of stablecoins is linked to what their issuers describe as
“reserve assets” and adequate regulation and oversight could reduce risks,
stablecoins are not risk-free,” he continued.
There is no guarantee that they can be redeemed at par at any time. They do not benefit from deposit insurance, nor do they have access to central bank standing facilities. He illustrated this with the recent crash of TerraUSD, a stablecoin.
So when will the digital
euro be available?
2021, the ECB launched a two-year investigation phase to define the design
features of a digital euro, such as how to ensure confidentiality, which use
cases to prioritise, and what business options to offer intermediaries.
The research also examines how to distribute the digital euro to retailers and the public, its impact on the market, and the changes to European legislation that might be needed.
completion of this phase is planned for 2023 when the final decision on whether
to develop a digital euro will be made. At this point, the implementation phase
would begin, in which appropriate technical solutions would be developed and
tested, and the business agreements necessary to ensure the issuance of the
digital euro would be concluded. This phase is expected to last three years.
at every stage of the project, we will continue to engage with the European
Commission (which recently launched a consultation on the digital euro), the
European Parliament, and the finance ministers of the euro area
countries,” Panetta said.
Author: Marko Želko
Keywords: digital euro, European Central Bank,
European Union, cryptocurrencies
article is part of joint project of the Wilfried Martens Centre for European
Studies and the Anton Korošec Institute (INAK) Following the path of
digitalization in Slovenia and Europe. This project receives funding from the
and views set out in this article are those of the author and do not
necessarily reflect the official opinion of the European Union
institutions/Wilfried Martens Centre for European Studies/ Anton Korošec
Institute. Organizations mentioned above assume no responsibility for facts or
opinions expressed in this article or any subsequent use of the information