Will the day come when every European will have a digital euros at the European Central Bank (ECB)? The Frankfurt-based institution gave the green light on Wednesday to the analysis and testing phase of the most important project since the launch of the euro.
If all goes well, the digital euro it will be able to see the light around 2025 and join the means of payment available to Europeans.
Why a digital euro?
The ECB wants to accompany the boom of the virtual payments, which expanded with the COVID-19 pandemic.
Even in Germany, where cash reigns, consumers in 2020, for the first time, made more expenses per card.
But the ECB fears that this enthusiasm will not take advantage of the virtual currencies private or foreign currency.
In 2019, Facebook’s project to create a virtual currency triggered an electroshock.
In addition, several countries, such as China and the United States, are also working on issuing their own cryptocurrencies.
China has been testing payment since March e-yuan by mobile phone, with the ambition of turning it into a virtual reference currency that competes with the dollar, according to experts.
“A sovereign Europe needs innovative and competitive payment solutions,” German Finance Minister Olaf Scholz recently urged.
“The central bank’s currency will be at the heart of the payments system, reinforcing Europe’s autonomy in this era of digital currencies,” said Fabio Panetta, a member of the ECB’s board of directors.
What is the interest for the consumer?
the digital euro it will allow households and businesses to have this currency directly with an account opened with the ECB, which is currently reserved for commercial banks.
This money will be protected from any risk of loss, a strong argument at a time when the european deposit guarantee project is stalled.
The ECB also promises fast, easy and safe use when paying in a supermarket or online through a mobile phone app, for example.
The goal will be to “persuade consumers to move to a new means of payment which does not differ much from the existing ones in terms of treatment and range of services”, such as Apple Pay or PayPal, said Heike Mai, an economist at Deutsche Bank.
“Consumers’ payment habits will not change with the launch of the digital euro,” predicted Guido Zimmermann, an analyst at LBBW.
But the system could evolve in a few years, when the number and shapes of digital currencies have increased, according to Zimmermann.
Users will be able, for example, to make transfers or payments between Europeans, reducing bank costs, with their “portfolio” of digital euros available 24 hours a day, seven days a week.
How is it different from a cryptocurrency?
one cryptocurrency as the bitcoin it is not an official means of payment, its unit of account is not defined by the State but is issued by private organizations or controlled by participants of a computer network.
The issuance of new bitcoins is regulated by an algorithm and not by a monetary policy committee.
Central banks want to give stability to this speculative world of the digital currencies, whose quote looks like a rollercoaster. “A euro today should be worth a euro tomorrow, whether in kind or digital,” the ECB said.
What are the risks?
The ECB must take into account the concerns of Europeans about the risks to the protecting your privacy, a priority arising from a recent consultation of the institution.
The data should thisr more protected with the digital euro than with the equivalents proposed by private borrowers, says the ECB.
But the path is narrow because it is not a question of offering the same guarantee of anonymity as cash, for the obvious reasons of fighting tax fraud and the financing of illicit activities.
The main risk is the flight of savers to this new form of currency, which makes it possible to avoid the rates of a classic deposit account, which could weaken banks in the euro area.
The ECB is considering taxing currency deposits above a certain amount, for example 3,000 euros, Fabio Panetta, a member of the ECB’s board of directors, said in an interview with the Financial Times newspaper.
Furthermore, it is not intended to widen the existing digital divide within societies. “We’re going to continue to issue cash,” Panetta said.