The European Central Bank (ECB) report on the digital euro is a positive step by monetary authorities to explore the feasibility, suitability, and implications of issuing a digital euro in the future, in line with the initiatives of other central banks and in light of recent developments in the issuance of private stablecoins.
This work is a preliminary, non-conclusive approach to the scenarios that could justify the issuance of a digital euro and, should any of them materialize, what its possible basic characteristics and desirable design principles would be. Among these principles is that it should be a complementary instrument to cash and current bank money, and that the private sector can, based on it, offer new value propositions. It is positive that the report highlights the role the private sector would play in providing ancillary services and access to the digital euro, which would preferably be carried out through supervised entities.
Broadly speaking, this proposed complementary approach is very important, as is the conception of a possible digital euro as an accessible means of payment throughout the euro area and not as an investment asset. The ECB is sensitive in its report to the fact that a massive shift of funds towards the use of the digital euro could have a significant impact on the banking sector’s intermediation and financing activities, the transmission of monetary policy, and ultimately, financial stability.
Therefore, the authorities’ prudent approach of continuing to thoroughly evaluate the challenges and implications of its issuance, should it be necessary, and the need for practical experimentation to test design options, in which the Spanish banking sector would be willing to collaborate, seems appropriate.
