A Digital Euro
Recognising the need to reconsider the way in which Central Banks deliver core functions and core objectives in light of an evolving digital economy, a number of Central Banks are considering the potential issuance of a Central Bank Digital Currency (CBDC). In a European context, the European Central Bank (ECB) supported by the wider Eurosystem Central Banks are investigating the potential issuance of a CBDC – a digital euro.
What is a digital euro?
A digital euro would be a central bank liability (similar to physical euro banknotes and coins), except offered in digital form. It would be a fast, secure and easy to use instrument, which would be available for use by European citizens and businesses for everyday payments. A digital euro would ensure that citizens of the euro area would continue to have access to widely accepted, safe and trusted means of payment for the digital age. The issuance of a digital euro should be considered a complement to cash and not a replacement for cash
What would a digital euro mean for me?
A digital euro would give you greater choice for how you pay for goods and services, complementing cash and other payment services. If a decision to issue a digital euro were taken in the future, it would be the largest project undertaken by the Eurosystem since the launch of the single currency and could potentially have very significant implications for citizens, businesses and the financial system. Consequently, before any decision can be made to introduce a digital euro, all foreseeable benefits and potential drawbacks need to be carefully considered by the Eurosystem, the European Commission and the central banks and governments of euro area countries.
Why is the Eurosystem investigating this?
Around the world, central banks are considering whether and how they might issue CBDCs for a number of reasons, including tackling the declining use of cash; providing a catalyst for digitalisation of economies; increasing financial inclusion; and promoting competition in payments services.
For the Eurosystem, the issuance of a digital euro could support the wider policy objectives of the European Union including the digitalisation of the European economy and fostering the international role of the euro. A digital euro could also help to tackle specific monetary concerns by responding to the declining use of cash as a means of payment and ensuring the normal provision of payment services.
What is the status of the investigation?
In October 2021, the Eurosystem launched a two-year investigation phase to explore possible technical and policy options that could form the basis of a digital euro design. This investigation considers how digital euro could be distributed and used by citizens and businesses and the potential impact it may have on the European economy and society. The Eurosystem have published the progress reports outlining the progress made throughout the investigation:
The investigation phase itself is due to conclude in October 2023, where the findings from the investigation and next steps of the digital euro project will be outlined. At this juncture, the Eurosystem will decide if we should proceed to develop a digital euro, creating and testing design solutions with input from various stakeholders. This phase of the project is known as the preparation phase and should not be misconstrued as a decision to issue a digital euro. A decision to issue or not issue a digital euro will be taken after the digital euro preparation phase.
How can I find out more?
The ECB and Eurosystem national central banks will continue to provide updates on the digital euro project as the work progresses.
See also:
If you require any further information please contact the Central Bank of Ireland’s Digital Euro Project Team at [email protected].