The European Central Bank (ECB) has indicated it is considering the possible issuance of a digital euro, an electronic form of central bank money accessible to all citizens and businesses
A digital euro would complement cash, not replace it, and the Eurosystem will continue to issue cash in any case, the bank said.
However, in a 50-page report prepared by the Eurosystem high-level task force on central bank digital currency (CBDC), the ECB identified possible scenarios that would require the issuance of a digital euro.
One concern is if the use of cash were to decline significantly, other electronic payment methods were to become unavailable owing to extreme events, such as another global pandemic or some kind of adverse event, or foreign digital money were to largely displace existing means of payment.
Christine Lagarde, ECB president, said: ‘The euro belongs to Europeans and our mission is to be its guardian.
‘Europeans are increasingly turning to digital in the ways they spend, save and invest.
‘Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.’
The task force, made up of experts from the ECB and 19 national central banks, identified several potential scenarios. These included increased demand for electronic payments in the euro area; a significant decline in the use of cash as a means of payment; the launch of global private means of payment that might raise regulatory concerns and pose risks for financial stability and consumer protection; and a broad take-up of CBDCs issued by foreign central banks.
Fabio Panetta, member of the ECB’s executive board and chair of the task force, said: ‘A digital euro would support Europe’s drive towards continued innovation. It would also contribute to its financial sovereignty and strengthen the international role of the euro.’
However, the ECB has not taken a decision on whether or not to go ahead with a digital euro project, or decided how it would operate in practice, taking into account setting-up and running costs.
The report noted that a digital euro could be designed to replicate some key features of cash that are useful in the digital economy, such as the ability to make offline payments.
However, it should also provide online payment capabilities that could support the fulfilment of the mandate of the Eurosystem in other areas.
The ECB said any potential solution must satisfy a number of principles and requirements – including robustness, safety, efficiency and protection of privacy – while complying with relevant legislation, including legislation on money laundering and the financing of terrorism.
The bank is to launch a public consultation on 12 October.