On October 2, the European Central Bank (ECB) published an extensive report on the probable issuance of a digital euro. The currency is currently under development and was approved by the Governing Council. The Eurosystem High-Level Task Force on central bank digital currency (CBDC) is the developer.
A digital euro would act as an electronic form of central bank money that will be accessible to all citizens and firms just like banknotes but in a digital form. People could then use the digital euro to make their daily payments in a quick, easy, and secure way. It is designed to complement cash, not replace it. Nonetheless, the Eurosystem will continue to issue cash in any case.
Christine Lagarde, ECB President said:
“The euro belongs to Europeans and our mission is to be its guardian. Europeans are increasingly turning to digital in the ways they spend, save, and invest. Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”
The Eurosystem task force brings together many experts from the ECB and 19 national central banks of the euro area. They have identified possible scenarios that may need the issuance of a digital euro. Such scenarios include growing demand for electronic payments in the eurozone that may need a European risk-free digital means of payment.
Importance Of A Digital Euro
Also, a considerable decline in the use of cash as a means of payment in the euro region and the launch of global private means of payment that may heighten regulatory concerns are driving the development of the digital euro. These scenarios pose risks for financial stability and consumer protection coupled with a widespread take-up of CBDCs issued by foreign central banks.
The ECB’s Executive Board and Chair of the task force, Fabio Panetta, said:
“Technology and innovation are changing the way we consume, work, and relate to each other. A digital euro would support Europe’s drive towards continued innovation. It would also contribute to its financial sovereignty and strengthen the international role of the euro.”
A digital euro can readily preserve the public good that the fiat Euro offers to citizens. It provides free access to a universally accepted, simple, risk-free, and trusted means of payment. Furthermore, it poses challenges although by following the ideal strategies in the development of the digital euro, the Eurosystem can address these.
Interestingly, the Governing Council is yet to decide on whether to introduce a digital euro since the Eurosystem also needs to be ready for any possible future decision to launch the currency.
The Eurosystem announced that it would engage widely with academia, citizens, public authorities, and the financial sector to assess their needs. They will do public consultation and experimentation to determine the expected challenges and benefits from the issuance of a digital euro. The public consultation will launch on October 12.
Experimentation will also start simultaneously without any prejudice to the final decision.
