07 Dec 2023

The case for launching a digital euro is not established at present

SAFE Senior Fellow Ignazio Angeloni stressed at a hearing in the European Parliament that the eurozone retail payment system today does not require the introduction of a central bank digital currency

“Our payment system in the euro area is modern, efficient, privately owned but subject to strict supervision and control by the European Central Bank, the European Commission, and the legislators. A digital euro would upset this balance, as the ECB, as supervisor, would become a market player competing with private market participants,” said Ignazio Angeloni, Senior Fellow at the Leibniz Institute for Financial Research SAFE, at a public hearing of the European Parliament’s Committee on Economic and Monetary Affairs (ECON), where experts and committee members discussed the status of introducing digital central bank currency in Europe.

According to Angeloni, such an introduction would be justified if there were clear signs of malfunctioning in the current payment system in Europe. However, this is not the case at present. The ECB should be prepared for that eventuality but not launch the digital euro unless those conditions materialize. “The ECB ensures price stability with interest rates and refinancing operations as monetary policy instruments, regardless of the physical or digital form of cash.” Even if cash disappeared, that stability would be maintained as an “anchor of money.”

“The disappearance of cash is a myth”

The economist explained in his statement to the ECON Committee that new payment methods in everyday life, such as debit cards and smartphone applications, are on the rise, while the use of cash is declining but remains essential. “The disappearance of cash is a myth. Over the past 20 years, the value and number of euro banknotes has steadily increased. The same happens for other currencies. Countries like Norway and Sweden, where the amount of cash has shrunk, are exceptions. What is decreasing is the use of cash for particular transactions, such as retail purchases.”

The Single Euro Payments Area enables free-of-charge transfers within the 20 eurozone countries and beyond via the SEPA system. U.S. networks such as MasterCard and Visa are also available in Europe, competing with local providers. “This progress has been driven by market competition under the supervision of regulators, including the ECB. A digital euro as a copy of the existing facilities can hardly add any significant value today”, stressed Angeloni, who had already presented an analysis on the digital euro in April at the request of the ECON Committee.

Scientific Contact

Ignazio Angeloni

SAFE Senior Fellow