“Pay Anywhere, Pay easily, Pay safely” ECB Unveils Digital Euro Motto
Addressing the National College of Ireland, Member of the Executive Board of the European Central Bank Fabio Panetta extensively discussed the future of the digital euro, the European version of a Central Bank Digital Currency (CBDC).
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“When we launched this project, we made it clear that this is a common European enterprise. Our collective effort is key to the preparation and eventual success of a digital euro,” he said in the opening part of the speech.
While emphasizing that the world is facing the most serious geopolitical crisis since the Cold War, with Russia’s invasion of Ukraine casting doubt on the reliability of a global order that enabled unprecedented economic interdependence, he said the financial realm is undergoing significant changes as well.
“Digital technologies, changing payment habits and the race for payments supremacy are testing the complementarity of public and private money, which has long formed a cornerstone of our monetary system,” he noted, adding that consumers are increasingly preferring non-cash payments, with only 20% of the cash stock being used for payments compared to 35% fifteen years ago.
The introduction of a digital euro would, therefore, “fortify our monetary sovereignty and provide a form of central bank money for making daily digital payments across the euro area, just like cash for physical transactions.”
In his speech Panetta, also disparaged cryptocurrencies, underscoring that they are too risky to act as a reliable means of payment.
They behave more like speculative assets and raise multiple public policy and financial stability concerns. Anyone investing in cryptos must be prepared to lose all their investment,
he said while also referring to the recent catastrophic slump of TerraUSD (UST) that has been unpegged from the U.S. dollar.
However, he acknowledged there is a growing appetite among people for using non-cash payments, immediacy, and digitalization. Accordingly, the official sector must satisfy this demand.
By introducing the digital euro, Europe would “protect our strategic autonomy while remaining open in a world where technology and dependencies are increasingly being weaponized”, he said. It would also level the playing field by allowing intermediaries, including small ones, to offer more technologically advanced products at a competitive price, scale up innovative payment solutions in the eurozone, which covers 19 states in the European Union, and promote the motto “pay anywhere, pay easily, pay safely”.
According to Panetta, in October 2021, the ECB launched a two-year investigation phase, which scrutinizes “how to ensure confidentiality, which use cases to prioritize and what business options to offer intermediaries.” The next step is to resolve the trade-offs between ensuring the right of individuals to confidentiality versus the public interest in maintaining the level of transparency required to combat illicit activities, among others.
If all goes to plan, the digital euro could go live at the end of 2023, with the testing period taking up to three years.
According to the Atlantic Council, 87 countries (representing over 90 percent of global GDP) are exploring CBDCs – two and a half times more compared to May 2020.
One of the few pioneers in the field, China has been exploring the benefits of CBDCs since 2014. While Beijing is yet to polish the project and announce the official roll-out date of the digital renminbi, according to reports, the currency has already been used by over one hundred million Chinese residents.
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