The introduction of the digital euro: opportunities and risks from the perspective of a financial expert.

The introduction of the digital euro: opportunities and risks from the perspective of a financial expert.

According to a report by Jungefreiheit.de, the European Central Bank (ECB) is pushing ahead with the introduction of the digital euro. The ECB has decided to enter the two-year preparatory phase in which the rules will be drawn up and providers will be selected for the development of a platform and infrastructure. The application of digital money will also be tested in this phase. However, the introduction of the e-Euro is by no means certain as it requires a legal basis that must be approved by the EU Parliament, the EU Council and national parliaments. Bundesbank President Joachim Nagel is confident that the digital euro will be introduced in around five years.

The e-Euro would be a third form of money alongside cash and bank money. It is digital cash that can be used as legal tender. Each user would have a digital central bank account with commercial banks, which can be accessed via an e-wallet. The payment process should be possible online and offline, although the latter would be possible anonymously and even with a limited internet connection.

As central bank money, the e-Euro would be fail-safe, while deposit money in bank accounts is subject to the risk of insolvency. However, an upper limit of 3,000 euros for the e-Euro would be discussed in order to prevent bank deposits from being shifted into central bank money in the event of a crisis. However, the introduction of the e-Euro could result in banks losing some of their business and their ability to lend, as they would need central bank money, which would now be tied up by the e-Euro.

According to a report by Peter Bofinger, a former member of the Advisory Council, the digital euro would have no relevant advantages over existing electronic payment providers. Ignazio Angeloni, former director of the ECB, mentions Europeans' fear of being technologically backward as a possible motive for the introduction of the digital euro. Other central banks around the world are trying similar projects that are not always successful, such as the Chinese e-Yuan.

The e-Euro is advertised with the issue of cost, as consumers would not have to pay any fees. However, there are costs for the additional infrastructure of the payment system, which must be borne by the merchants. It is expected that the digital euro will not displace cash and that both means of payment will coexist. However, exceptions can be made for money laundering and “no cash” transactions.

A potential problem with the digital euro is the issue of data protection and surveillance. The ECB assures that it has no access to personal data and cannot draw any conclusions about individual individuals. However, the e-Euro requires an account and only the offline version could match the anonymity of cash. The e-Euro should not be programmable to restrict its use, implement sanctions lists or reduce its value.

Overall, the introduction of the digital euro has not yet been finally decided and will be further developed in the coming years. It remains to be seen what the legal basis will be and whether the e-Euro can actually meet all the requirements.

Source: According to a report from Jungefreiheit.de