The ECB has not yet reached the official verdict for the digital euro (CBDC). The CBDC, according to the project enthusiasts, will be a form of money issued within the framework of the ECB policy, within the Eurosystem. Initially it will be offered as alternative digital money, which will be used by consumers and businesses in the field of retail sales. This is because the European Central Bank is forced to follow the rapid changes in the field of payments and transactions in the field of retail sales and to offer corresponding digital tools to European citizens. The adoption of the digital euro will have 6 different objectives.
And because ECB’s objectives are largely vague in the minds of CBDC rapporteurs, what it has not clarified is how to settle and control transactions. There is a conflict between decentralised clearance where users or intermediaries are responsible for transactions and central clearance by the ECB. In any case, it is believed that the ECB should have the final say and control over the so-called back-end infrastructure.
Given that the European Central Bank’s intentions are not clear, it is not difficult to misunderstand even the basic principles governing the issuance of the digital euro. Especially today, when there are rumours about the immediate adoption of the CBDC, but also important developments in the field of cryptocurrencies, with the entry into the “game” of large investment houses and providers of digital payments and clearings.
Three misconceptions about the digital euro
- The first misconception is that citizens think that the ECB will abolish the use of cash by imposing forever low or even negative interest rates on the digital euro. ECB officials have explicitly stated that the abolition of cash is not on the central bank’s agenda. The interest rates that will be enjoyed by those who hold digital euros, will be the same as the interest rates received by those who hold cash, i.e. 0%. If they have them in the form of deposits, then they will enjoy the respective bank deposit rates. It is also clear that the digital euro will be a tool for digital payments and not a monetary policy tool.
- The second one concerns the assessment that the adoption of the CBDC will replace banking mediation. It is clear that the ECB does not intend to change both the structures and the way the European banking system works. The status of banking intermediation and the operation of the supervisory and regulatory framework will not change, as the ECB will resist the entry of digital technology giants into the European payment and deposit system.
- The third one concerns the viability of the system to be built around the digital euro. The ECB is not interested in making a profit on CBDC transactions. Its goal is to provide citizens with an easy-to-use and secure digital alternative that meets the demands of global digital transformation. Unlike the rest of the ecosystem of cryptocurrency exchanges, off-bank transactions and profit-seeking fintech applications, the ECB will provide CBDC support services free of charge.