The European Central Bank (ECB) is considering the issuance of the digital euro
We have long since entered the digital age, but it seems that it is just taking its true form. We are increasingly turning to digitalization, especially during the pandemic, when the governments of countries, but also companies around the world, realized that this is the main path to progress.
Skeptics regarding bitcoin have now shown it more confidence, and the latest news is that the European Central Bank (ECB) is considering the introduction of the digital euro, that is plans to test the idea through a pilot project starting on October 12th. This is motivated by the increased use of contactless payment methods, which do not include cash, and the ECB says it must be ready to launch digital money if all the changes in the world require it.
“EU citizens are increasingly turning to digital spending, savings and investment. Our role is to ensure trust in money. This means that we need to ensure that the euro is adapted to the digital age. We should be ready to issue the digital euro, if the need for it increases.”, the ECB states. They also state that there will be a public consultation with citizens, academics and bankers on the subject matter. According to the ECB’s plan, the digital euro would be similar to bitcoin, but unlike other cryptocurrencies would be under the control of the central bank.
Digital currencies use blockchain technology, i.e. large transaction databases. The digital euro would also be based on that technology, and would be used in internet transactions. The digital version of the common European currency would be available to all citizens and companies in the Eurozone, the ECB explains, adding that it would be “similar to banknotes, but in digital form”.
The ECB envisioned it as a cash supplement, not a replacement. The digital euro would differ from the current cash-free payment system run by the private sector because it would be the official money of the Central Bank – risk-free and without expensive costs of use. The digital currency of the Central Bank could also be used offline, for example to transfer small amounts of money between individuals, using digital wallets on phones via a bluetooth connection. However, it was said that a final decision has not been made yet.
The European Central Bank is not the only one dealing with this issue. The Central Bank of China is also testing the official digital currency, while the Swedish Central Bank has already started a pilot project. The US Federal Reserve is considering this solution, but they have a somewhat longer-term view on this issue because they want to carefully study digital currencies in general, as well as digital currencies of central banks around the world.