Does the digital euro still make sense? What is its future?

What if the European Central Bank introduced the digital euro in the next several years? The ECB might provide the legal basis for the digital euro, which is coming early next year. This is also good news for account holders: the ECB, like all other central banks, cannot theoretically go bankrupt, ensuring the protection of deposits. What does this all mean? What does the digital euro’s future hold? Learn more in this article.

When will the digital euro be implemented?

According to Fabio Panetta, a member of the ECB board of directors, the European Central Bank may issue CBDC until 2026.

“This is a very complex project; nothing like it has ever happened before.” I’m optimistic that we’ll be ready in four years.” During a speech at the National College of Ireland, the official stated.

François Villeroy de Galhau, the Governor of the Bank of France, has given an estimated launch date for the digital euro:

“In Europe, we are halfway through the study phase: by the end of 2023, the Eurosystem will decide on a prospective launch in 2026 or 2027.”

What is the purpose of the digital euro?

François Villerois de Galau stated at the conference that we should differentiate between a retail MNBC and a wholesale MNBC. The retail digital euro would largely benefit European Union residents in their daily lives. The wholesale digital euro would be useful for central banks and large financial institutions.

Also, wholesale MNBC might accompany security tokenization by serving as a settlement asset for these securities.

“Not being able to offer wholesale MNBC to market participants would risk opening the way for the widespread use of so-called “stablecoins”, which would pose a systemic risk.“

The Governor of the Bank of France believes that the digital retail euro will contribute to the protection of monetary sovereignty and strategic autonomy. He also stated that the digital euro will limit the use of so-called private crypto assets as settlement assets, as well as non-European MNBCs.

CBDC’s role in retail payments and the EU digital economy

Implementing CBDC paves the way for new digital business models and income streams. Automated e-commerce functionalities have become available for wider users. In turn, smart contracts guarantee that rules recorded in contracts lead to planned actions and independently monitor their implementation. Furthermore, CBDB supports decentralized customer service. Commercial banks and financial service providers will not compete with central banks with a clear separation of duties.

So far, the partnership of central bank money and commercial bank money has organized the retail payments environment and maintained monetary system stability. Their different functions are well defined: central bank money anchors the financial system’s stability, while the wide number of commercial bank money issuers preserves competition and innovation. Their interaction and interchangeability maintain the monetary and financial system’s security. The digital euro should never imply the removal of fiat bank money; on the contrary, digitalization cannot imply the disappearance of central bank money.

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Valentyna Bereza, Team bit4you.