The European Central Bank (ECB) is considering launching a digital euro that is designed to complement cash.
In a statement on October 12th to the Committee on Economic and Monetary Affairs of the European Parliament, ECB executive board member Fabio Panetta says that the need for a digital euro is fast approaching as the European society is moving quickly towards digital payments.
“We do not have a digital currency issued by the central bank that we can use for all our daily transactions. A digital euro would fill this gap and be a digital equivalent of euro banknotes. It would complement cash, not replace it.”
Panetta also highlights that the digital euro would not invade the privacy of its users.
“A digital euro would conform to the people’s fundamental right to privacy – we are already exploring ways of enhancing it. Unlike private suppliers, the central bank has no commercial interests related to consumer data.”
Although cash is still the preferred mode of transaction in the euro area, its appeal is quickly diminishing. In some countries, cash payments decreased from 79% in 2016 to 73% in 2019, Panetta notes.
As Europeans move away from cash, Panetta reiterates the important role of the ECB to provide Europeans with safe and easy access to money.
“Central banks have the fundamental task of providing citizens with costless access to simple, secure and risk-free means of payment.”
Panetta also emphasizes that the digital euro would introduce legal, technological, and policy issues that have to be addressed. Of the three, the ECB executive explains why it is important for the digital euro to have legal tender status.
“Indeed, central bank money is a public good. Euro banknotes fulfill the core function of providing people with risk-free central bank money. It is crucial to ensure that, as a form of public money, a digital euro enjoys universal reach and acceptance, as the legal tender status provides.”
But introducing a digital euro is beyond the legal or the technical issue, Panetta says. More important than ensuring that the digital euro is designed to be simple, easy to use, and consistent with key policy objectives, Panetta says it should be rooted in citizens’ trust.
“To be successful, a digital euro would also have to enjoy strong support from the public. It would be a digital symbol of progress and integration in Europe. And it would support the international role of the euro…
This is why we are seeking, through the public consultation we are launching today, an intense and open dialogue on our recent report with citizens and other stakeholders.”
After a period of preparation, the ECB is set to decide whether to pursue the initiative in the middle of 2021.
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