The digital euro has entered a two-year preparation phase which will lay the foundations for potentially issuing the digital euro across Europe.  According to a new survey conducted by BearingPoint, 32% of respondents in the Netherlands are unaware of the digital euro.  So, whilst knowledge of the digital euro is relatively widespread across Europe, further communication and education is required to ensure acceptance of the digital euro as a supplement to cash.

What is the digital euro?

The digital euro would be a digital version of physical bank notes and coins, it would be free of charge to individuals and businesses within the euro area for making everyday payments.  Importantly, it should be seen as a complement to cash and not a replacement.   

Globally, central banks around the world, including the ECB are investigating the potential for issuing a Central Bank Digital Currency (CDBC), as a means for addressing the declining use of cash and promoting greater innovation and competition within payment services.  Other countries that have launched, piloted, or are exploring a digital currency include: The Bahamas, China, India, Sweden, Malaysia, Brazil and Australia.

How would it operate?

A broad range of options are being investigated around how it would work in practice, with digitalisation central and financial inclusivity being core principles.   The digital euro would be usable across a range of digital payment devices, including mobile phones, smart watches and tablets, and could be integrated with existing apps such as your bank account.  Importantly, it would also offer the ability to make payments with a device when there is no internet or mobile connection.  

For those without a digital device and / or a bank account, they could still access the digital euro through a payment card issued by an agency such as a post office.

What are the benefits?

The digital euro will be a cash like payment method, complementing existing payment methods and would be designed to easily integrate to delivering a number of benefits, including:

  • Payment simplification: The digital euro would provide a simple, free and a digital alternative in many payment situations, both online and offline and without requiring a credit card or current account.
  • Simplifying travel:  For those travelling in Europe, it will provide a secure, digital option providing cash like features and benefits that work throughout the euro areas – no more worrying about ATM costs when using your card abroad.
  • Driving further innovation: Over the past few years we have seen significant innovation within financial services with growth of the FinTech’s.  However, innovation within payments has been less prevalent. With the digital euro providing a cross European solution, there is every opportunity it would drive further competition and innovation within the payment space at cross European level and delivering improved services.

When can we expect the digital euro?

After a two-year investigation phase the ECB has moved forward to a preparation phase, which commenced 1 November 2023 and will run initially for two-years. The aim of the preparation phase is to lay the foundations for the potential issuance of a digital euro, including the digital euro rulebook and selecting providers that could potentially develop a digital euro platform and infrastructure. However, importantly, the decision on whether to ultimately issue a digital euro can only be considered at a later stage, after the adoption of the legislative framework for the digital euro at the European level.

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