Europe | Digital euro, questions in search of answers

Summary

How would a digital euro work? What value would it bring when today I can already pay/charge for everything using my mobile, apps and favorite sites? Would it entail risks? So far these simple questions have not met straightforward answers, but they have sparked an extensive economic, political and technological debate.

Key points

• Key points:
• In October, the European Central Bank started a two-year "research phase" to advance a proposal that, if accepted, would be implemented over the following three years.
• The digital euro or any other CBDC (Central Bank Digital Currency) could help secure universal access to the growing digital market. It would also lower transaction and innovation costs in the fast-moving payments market.
• But the main benefit flagged by several authorities is a different one: preventing some poorly regulated digital currency (whether private and/or foreign) from finding a foothold from which it could end up dominating the European payments system.
• China is furthest ahead in the implementation of its digital yuan (which is already operational in several cities) and has banned cryptocurrencies like bitcoin. In the Bahamas, digital "sand dollars" have been in circulation for more than a year, but still account for only 0.01% of the money supply.
• If implemented, it will be key to define and ensure privacy levels that are compatible with the prevention of crime and money laundering. It will be equally important to safeguard financial stability, avoiding disruptions both domestically (banking) and foreign (capital markets).

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