Thomas Moller-Nielsen
(EurActiv) –For those unfamiliar with the concept, the digital euro is likely to induce severe bewilderment – or a shrug. Isn’t a digital euro simply any euro that isn’t physical cash? And, if so, don’t we already use digital euros whenever I use my bank card?
In fact, the answer to both questions is ‘no’. The digital euro is not any euro that doesn’t take the form of coins or banknotes, and it doesn’t already exist.
Many European officials, however, wish that it did. Indeed, the topic is being debated with increasing urgency – and frequency – by EU policymakers. Eurozone finance ministers will discuss the matter in Luxembourg on Thursday, and MEPs argued over it Strasbourg on Wednesday.
Moreover, the European Central Bank (ECB) is currently just three months away from completing a two-year “preparation phase” ahead of the digital euro’s potential launch in a few years’ time.
So, what is the digital euro? Why is it being discussed so much? And is it actually a good idea?
The basic concept
Although the digital euro’s precise properties remain undefined, the core idea is to have a digital payment method that is as close as possible to cash.
In particular, the digital euro would, like cash, be issued and fully guaranteed by the ECB. This contrasts with ‘digital’ money in your commercial bank or cryptocurrency account. If your bank were to fail, you could lose all your savings above €100,000. The ECB insures deposits up to €100,000.
“The digital euro is ‘digital cash’, in the sense that it will always be honoured by the ECB,” said Maria Demertzis, who leads the Economy Strategy and Finance Centre for Europe at the think-tank The Conference Board. “This is not always true for other ‘digital’ types of money.”
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