By using a ‘digital euro’, the European Central Bank aims to compete with existing means of electronic payments such as digital wallets, online banks, or cryptocurrencies. The recent move would allow holders to make payments via the internet and possibly even offline. According to reports, the ‘digital euro’ would be backed by the central bank in a bid to make it ‘risk-free’ like banknotes and coins.
The ‘digital euro’ is the electronic equivalent of cash. The virtual euro would be legal tender and guaranteed by the European Central Bank. For the first time, it would allow individuals to have deposits directly with the ECB. Additionally, like cash, money could be stored outside of the banking system, such as in a ‘digital wallet’.
Some concerns regarding a digital euro focus on weakening banks ‘role in the euro area, on privacy, and on making sure the ‘digital euro’ cannot be used for money laundering.
On October 12, 2020, ECB will be launching a three-month consultation and will carry out a series of experiments on the feasibility of a digital euro over the next six months. While the bank still aims to just decide around mid-2021 whether or not to launch the project, an official reportedly said that it will take between 18-months and three or four years to see the initiative come to life, according to Republic World.
Interested to learn more about CBDCs? Check out a quick guide into CBDCs from the Dutch Central Bank here.
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