The European Central Bank is developing a digital euro that could help boost the single currency international status .
The digital euro would still be a euro: like banknotes but digital. It would be an electronic form of money issued by the Eurosystem (the ECB and national central banks) and accessible to all citizens and firms.
It is currently in a preparation phase as the ECB is still developing the concept, conducting practical experimentation, listening to the views of the broader public and engaging with stakeholders.
The main goal of this new digital currency is to provide a modern payment tool for all private citizens and businesses in the Eurozone.
Once it’s approved, the digital euro will enable simple and immediate payments, and money transactions that are completely digital and will also lead to decrease in costs associated with payment systems.
The platform will also come with other benefits for instance the registration of transactions would drastically reduce money laundering and tax evasion and as well as enable financial inclusion by allowing people without a bank account access fast, easy and secure tool for daily payment.
It could also support the digitalization of the European economy and actively encourage innovation in retail payments.
People using a digital euro would have the same level of confidence as with cash, since they are both backed by a central bank, which is something crypto-assets such as stablecoins cannot provide.
Opening a digital euro to foreigners however would also come with risks such as paving a way for money laundering or facilitating runs on weaker currencies at times of crisis.
The ECB has said the security concerns could be addressed in the design of the digital currency, for example by setting a cap on how much each citizen can own or forcing disclosure.
“Transparency or selective privacy would enable better compliance and know-your-customer checks to be implemented, thereby controlling illicit payment flows, for instance for large transactions,” the ECB said.
“These safeguards would strengthen the reputation and credibility of the digital euro.
According to ECB President Christine Lagarde, implementing the digital euro will take up to 5 years. Before that happens, further discussions will need to take place on issues such as payment privacy and the actual role of the ECB in overseeing the operation of the digital euro.