The digital euro: what we already know and what we still don’t know

2023-11-21 02:12:48

In an increasingly digital environment, would it be advisable to have a digital currency, supported by a public infrastructure, with which to make payments throughout the eurozone? This is the question that the European Central Bank (ECB) seeks to answer with its digital euro project. The monetary authority of the eurozone is clear that yes. Hence the different steps that are being taken so that, in the future, and not before 2027, a digital version of the euro can become a reality. Although the project has not yet concluded, and it is not even guaranteed that the necessary consensus will finally exist to launch the coin, many details are already known, although not all. What would the digital euro be? It would be a legal tender distributed through the digital channel. This implies that its storage would be carried out through a digital wallet with which all citizens and companies in the euro zone could make payments. As it is a legal currency, the money that citizens had in digital euros would be comparable, for all purposes, to what they could have in physical coins and banknotes. In any case, as the ECB has repeatedly pointed out, a digital version of the current euro would not replace cash. Cash, due to its characteristics, continues to have value in our societies. The possible digital euro would offer Europeans a payment method that is easy to use, free and accepted throughout the eurozone. All this in a context in which we are seeing how citizens are beginning to adopt different digital payment methods to a greater extent: bank cards, payments with mobile devices, payments with QR codes, etc. How will you have access to digital euros? Although the ECB is still working on the design and functionalities of this digital currency, it has already indicated how such a currency could be used. The currency would be available through a mobile application. Either the application of our bank or payment institution, or through a specific application for the digital euro, created by the ECB. Those without a bank account or a digital device will also be able to access digital euros. In this case, they will do so using a physical card offered by public organizations. Can you always pay with digital euros? Although the use is mainly done through an application, it will be possible to pay with digital euros even if there is no connection to the network (offline). This guarantees that it can be used in any circumstance – for example, in cases where the Network goes down – and at any point – for example, in geographical areas where there is no connectivity. Citizens of the euro zone may use it in any member country of the common monetary zone. All businesses in the euro zone that accept digital payments will be required to accept payments in digital euros. What is missing to know? The main unknown is whether this coin will finally be launched. Everything that is known so far is based on the presentations that the ECB has made during the research phase of the project. The final decision will have to be made by the Governing Council of the ECB. Another issue that is unknown is the maximum limit of digital euros that citizens will be able to have in their applications. They will not have an unlimited amount of digital euros but there will be a limit on their holding. Firstly, because we want to prioritize its use as a means of payment in retail stores. The intention is not for the digital euro to become a store of value. Furthermore, we want to avoid, and with a lot of sense, the digital euro capturing the payment and deposit activity currently carried out by banks. If all citizens converted the money they have in their bank accounts into digital euros, financial disintermediation could occur in the eurozone. The specific technology that would allow its use is also unknown. There are several possibilities, including distributed ledger technology (DLT). In the preparation phase, pilot tests will be carried out with different technologies. According to the ECB, the technology that best suits the needs of the digital euro will be implemented. The questions will be cleared up little by little. As the ECB points out, the final decision on the issuance of the digital euro is still a distant resolution in time. What we are beginning to be more aware of is that in a more digital society, even physical currencies can become digital currencies.
#digital #euro #dont