Why we don’t need the digital euro

2023-12-16 14:24:20

The digital euro would fundamentally change the division of labor between the central bank and commercial banks. So far, the European Central Bank has provided physical money to private households and companies in the form of banknotes. Commercial banks create digital money in the form of bank deposits (“bank money”).

With the digital euro, the central bank would also act as a provider of digital money and come into direct competition with banks and other payment service providers. In terms of regulatory policy, such an expansion of government activity could only be justified if a clear market failure could be diagnosed.