The European Central Bank (ECB) is leading the way in exploring Central Bank Digital Currencies (CBDCs) with its plans for a digital euro. The digital euro aims to provide an alternative to cash in a cashless society, ensuring that consumers have access to public money in the digital age. It is designed to work alongside cash, not replace it.

Motivations behind the digital euro

The motivations behind the digital euro include preserving access to public money, enhancing monetary policy implementation, and streamlining cross-border payments.

Privacy and features

Privacy is a key feature of the digital euro, although it would not offer the same level of anonymity as cash.

Two-tier system

To address potential deposit losses for banks, the ECB plans to implement a two-tier system with unremunerated basic amounts and negative interest rates for higher amounts.

Target audience and future plans

The primary target audience is Eurozone residents, but there are plans to incorporate cross-currency functionalities in the future.

Concerns and skepticism

However, there are concerns about financial stability, credit conditions, and cyber risks associated with digital currencies. Skeptics question the benefits of a digital euro and its necessity as a monetary anchor.

Realization phase and launch

The ECB will enter a three-year "realization phase" to develop and test the necessary technical solutions and business arrangements. The launch of a digital euro is not guaranteed, and the ECB may reassess its introduction periodically.