The European Central Bank (ECB) has called on citizens to express their opinions, wishes and ideas for the design of an electronic euro via an online questionnaire. Since Europeans are increasingly regulating their finances digitally, one must be prepared to also spend a digital euro, said ECB boss Christine Lagarde.

The issues In the online survey, for example, the privacy of payments with the potential digital cash, how important the usability via smartphone would be, or whether payments should work offline. The ECB has not yet taken a decision as to whether there should be a digital euro at all. The possibilities are to be explored and the first test runs with potential designs carried out, it was said at the beginning of October. The monetary authorities also assured that a digital euro would be a supplement to cash, not a substitute: “In any case, the Eurosystem will continue to issue cash.”

Central bank money and deposit money In view of daily payments with SEPA transfers, giro cards or PayPal, it seems confusing at first, why a digital euro is still needed. The point: The ECB is concerned with central bank money. So far, this has only been available to end consumers and companies outside the banking world in the form of notes and coins. What you now use to pay cashless when shopping online – that is what is known as deposit money. It is also known as book money because it exists on the books of commercial banks. It is a form of money that the commercial banks create primarily by granting credit, and which is ultimately only a demand for the disbursement of central bank money. Of the latter, the banks only hold a minimum reserve.

Strictly speaking, bank money is not a legal tender. In practice, however, the amount of bank money is many times that of cash and it is assumed to be of almost the same value in daily payment transactions. And because more and more payments are now being made using cashless methods instead of cash at the till, the question then arises: Shouldn’t the legal tender, central bank money, also be available electronically in everyday life?

Ruble and yuan soon to be digital? So far, the ECB has only submitted a detailed report outlining various scenarios. There is no definition of what form the digital euro could take. The debate as to whether or not digital central bank money is needed has accelerated worldwide, especially due to the crypto-money-like Libra promoted by Facebook. Most recently, the Central Bank of Russia announced a pilot test for the digital ruble end 2021; and this Monday, Australia announced that it would start a test project with blockchain technology. The Bundesbank had previously spoken out against the premature introduction of such money.

China is likely to be in the lead: China’s central bank is reportedly hoping to use its digital yuan, which is already being tested, for the Winter Olympics 2022 in Beijing.

(axk)