The green light will not be given for some years for the launch of the digital euro. However, this week the European Central Bank (ECB) gave the go ahead to proceed to the next, more intensive phase of planning for the digital version of the single currency. And with payments moving increasingly online, the probability must be that major central banks, including the ECB, will go ahead. Doing so would also offer some longer-term strategic advantages to Europe’s politicians and central bankers.
A lot of work remains to be done. Developing and agreeing the rules and how the digital currency would be technically managed is challenging. And consumers also needs to be brought on board. They may well ask what advantages the digital euro can offer. It is up to Europe’s central bankers and politicians to make the case for a digital currency backed by the ECB on the basis that it could offer advantages over current payments systems in terms of acceptability and functionality.
In a world where stability, reliability and data privacy are highly valued, a key part of this campaign will be persuading potential users that the payments platform will be efficient and safe and that the digital euro is at least worth adding as an option on smartphones or via payment cards alongside existing private platforms.
Banks will play a role in this as they will be the distributor of the digital euro – if it is to work, then the link with existing bank accounts needs to be both safe and seamless. Difficult calls lie ahead in designing a system which serves the public but does not attract deposits away from banks.
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Big decisions must also be made on privacy. The ECB has said it has no interest in seeing details on where consumers spend their money, or controlling it in any way. However, as with exiting bank accounts, some protocols are needed to combat possible money laundering or the financing of terrorism. How these rules are framed will be important. Those intent on playing up the risks of a " Big Brother” style system are unlikely to ever be satisfied. But the middle ground, can be reassured by sensible and transparent rules.