The digital euro - more questions than answers?

The European Central Bank will be taking a close look at digital currencies in the coming years. The design options are manifold and raise questions.

This month (Oct. 2021) is set to kick things off. The European Central Bank (ECB) is launching a two-year analysis project to assess what the design of the digital euro might look like. The outcome of the analysis phase will be a decision on whether and in what form the ECB will provide the digital euro.

However, it is clear from previous discussions and publications: the digital euro will have few parallels to functions of current private cryptocurrencies. Blockchain infrastructures and their advantages are barely considered in the context of the digital euro. The European Central Bank will focus on alternative approaches to cash and the impact on the monetary system.
The (implementation) scenarios are nevertheless diverse, leaving room for exciting discussions. Potential forms and effects need to be understood and evaluated in depth.

The key questions below can serve as an initial baseline:

  • What added value and use cases are generated for the various stakeholders?
    • Financial institutions, payment service providers, private individuals, commerce, industry, European Central Bank
  • What does the technical design of the digital euro look like?
    • Will the digital currency be built on an account or token infrastructure?
    • How will value be transferred between the participating parties?
    • Will users be provided with a digital product only?
  • How will usage for private individuals be designed?
    • How will anonymity be ensured?
    • Will there be limits on the amount that can be used and deposited?
    •  …
  • How and by whom will onboarding and provision be carried out?
    • What regulatory requirements will arise?
    • How will financial institutions and payment service providers be involved?    
    •  …

Even though the analysis project is just starting, many trends can already be identified. PPI is following this topic with great enthusiasm and has already drawn up a number of theses on these questions. We will share and discuss them with you in the coming weeks.

Author: Philipp Schröder


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