currency
Digital Euro: What awaits consumers?
With the digital euro, “consumers would have the opportunity to use a digital form of central bank money in addition to banknotes and coins,” says the ECB. photo
© Karl-Josef Hildenbrand/dpa
The euro could be available in a new form in a few years: a digital version would complement banknotes and coins. The preparatory work for the digital euro has been going on for some time.
The monetary authorities have been tinkering with this for years Euro area on a digital euro. It has not yet been decided whether and when a digital version of the European common currency will be introduced. But the preparations alone are a source of conversation, rumors and claims that need to be classified.
Claim: Cash will be abolished.
Rating: False.
Facts: “A digital euro would complement cash, but not replace it,” assures the European Central Bank (ECB). “The digital euro would be an electronic form of cash for the digitized world. With it, consumers would have the opportunity to use a digital form of central bank money in addition to banknotes and coins.” According to the wishes of the EU Commission, the digital euro should become legal tender in addition to notes and coins.
The authorities in Brussels even want to ensure by law that cash continues to be widely accepted in the European Union and that consumers have universal access to it. “To maintain the legal tender status of cash in practice, easy access to euro cash must be ensured, because if citizens do not have access to cash, they cannot pay with it and the legal tender status is undermined ” says a legislative proposal from the EU Commission presented at the end of June 2023. Consumers should be able to freely decide whether they pay in cash or non-cash.
Claim: Digital payments are increasing.
Rating: Correct.
Facts: Cash is still the most frequently used means of payment at the checkout in the euro area, according to an analysis by the ECB published at the end of 2022. But in terms of value, card payments surpassed notes and coins for the first time. Surveys repeatedly show that the corona pandemic has accelerated the trend towards electronic means of payment.
Claim: Anyone who pays digitally is being monitored.
Rating: Conditional.
Facts: Only those who pay with cash remain completely anonymous. The Bundesbank writes in its April 2021 monthly report that “complete anonymity of payments without any digital traces” cannot be “represented with digital money”. However, this also applies to other electronic forms of payment.
With the digital euro, as with other digital payment processes, comprehensive information about individual business activities could be collected. The developers strive to protect data protection and financial privacy, as Bundesbank board member Burkhard Balz, who is involved in the project, assured. At the same time, Balz said: “There cannot be complete anonymity, as the regulations on combating money laundering and preventing terrorist financing must of course be adhered to. But it is certainly conceivable that small amounts can be processed with an even higher degree of privacy.”
Claim: The digital euro is unnecessary.
Rating: Conditional.
Facts: In fact, there are already plenty of ways to pay cashless: by debit or credit card, with a smartphone or smartwatch and services such as Apple Pay or Google Pay and – used by millions of people when shopping online, for example – via Paypal . However, the list also shows that digital payment transactions in Europe are dominated by private sector providers from non-European countries, especially from the USA. The Europeans want to counter this with their own offer. With a digital euro, dependence on international corporations would decrease and people would get a digital currency whose stability would be guaranteed by the ECB. Another advantage for consumers: If there are more offers for digital payment overall, the ECB and the EU Commission believe that this could also lead to their use becoming cheaper.
Claim: The digital euro is nothing different than Bitcoin and Co.
Rating: False.
Facts: In contrast to so-called cryptocurrencies such as Bitcoin and Ether, whose prices often fluctuate greatly, the introduction of a virtual European currency would offer private investors a more stable alternative as it would be linked one-to-one to the euro. As with cash, the ECB would guarantee the stability of a digital version of the European common currency. “We see a digital euro as a digital form of cash with which all digital payments can be made free of charge and which meets the highest data protection standards,” explained ECB President Christine Lagarde.
Claim: Every citizen must have an account with the ECB for the digital euro.
Rating: False.
Facts: The financial industry should play a key role, as Bundesbank board member Balz made clear. “The Eurosystem will not be a commercial bank for the citizens of Europe. The Eurosystem would issue the digital euro, but would not distribute it to the end users itself,” said Balz in a speech in Berlin at the end of November. “Supervised intermediaries should act in their usual role at the interface with the customer.” This means, for example, banks. They could obtain the digital euro like cash from the central banks, and consumers would then receive it in a digital wallet, a so-called wallet.
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