Digital Euro: Question Is Not “If” But “When”?

The euro is the second largest sovereign currency in the world. The euro is used for payment and price quotations, two of the most important functions of currency. The launch of the digital euro would have an impact beyond the euro system.

In a 55 page report published by the European Central Bank, reported that the digital euro will allow people to access fast money in a fast-changing digital environment. A digital euro “would have pervasive effects on society as a whole,” wrote the authors of report on a digital euro.” 

A variety of guidelines for the architecture of the digital euro are laid out in the report. Firstly, the digital euro will also be the euro and thus completely convertible at the same time as the other versions of the euro. This means full functionality of bank notes, reserves and bank deposits. Second, the euro has to be the responsibility of the Eurosystem, which means low-risk central bank money. Third, it should be commonly available in the euro region. Four, it should be business neutral, that is, it should not smother private solutions. Lastly, people and end users should be trusted.

What is a digital euro?

Most Europeans may be scratching their heads at the possibility of a digital euro, portraying the many digital purchases they have made using online bank accounts. What will be the difference?

A digital euro would be an electronic form of central bank money accessible to all citizens and firms  like banknotes, but in a digital form to make their daily payments in a fast, easy and secure way

“The main difference would be that such a transfer would be in central bank money, the safest means of payment,” Ulrich Bindseil, director general for market infrastructures and payments at the ECB. “It would be as safe as cash  but digital. Currently, electronic transfers between citizens deposits take place in so-called commercial bank money.”

ECB president Christine Lagarde said a digital euro could provide an alternative to “private digital currencies,” as well as a complement to cash.

Benefits of a digital euro?

Fabio Panetta, Member of the Executive Board of the ECB said, A digital euro would aim to preserve the public good that the euro provides to citizens: costless access to a simple, universally accepted, risk-free, trusted means of payment. Issuing a digital euro may become necessary in a variety of scenarios: think of situations where people no longer prefer paying with cash, or extreme events such as natural disasters or pandemics where other payment services no longer function. 

A digital euro would also protect us from the potential for a public or private digital means of payment, issued and controlled from outside the euro area, to largely displace existing means of payment, which could raise regulatory concerns and threaten financial stability or even monetary and financial sovereignty.

3 scenario-specific requirements

  • In a range of future scenarios, a digital euro could be a viable option for the Eurosystem in order to achieve the objectives related to core central bank functions (Section 2.1) and the general economic policies of the EU (Section 2.2), provided that its design meets scenario-specific requirements. 


  •  A digital euro could be issued (i) to support the digitalisation of the European economy and the strategic independence of the European Union; (ii) in response to a significant decline in the role of cash as a means of payment, (iii) if there is significant potential for foreign CBDCs or private digital payments to become widely used in the euro area, (iii) as a new monetary policy transmission channel, (iv)) to mitigate risks to the normal provision of payment services, (v) to foster the international role of the euro, and (vi) to support improvements in the overall costs and ecological footprint of the monetary and payment systems.


  • The materialisation of a specific scenario does not necessarily warrant issuance of a digital euro to the extent that alternative solutions are available.


The digital euro would have to consider major issues, such as possible cyber threats, the right to privacy, and whether the implementation of a digital currency by the central bank will result in the collection of consumer confidential information.

The ECB report underlines that reforms are in their early stages and that the next step is to open a discussion with all stakeholders, including the people of the euro region. This report opens a review process until mid-2021, then the ECB can decide whether to begin a digital euro project and develop a minimum viable product.




For more info on latest news and analysis, please sign up Fyggex community online




*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available cryptocurrency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.