Digital Euro — pros and cons

Photo by Portuguese Gravity via Unsplash

In this article, I am writing about discussions and ideas concerning the “digital euro”. The articles begin with views by the European Central Bank. After that, I am presenting views of different experts and opinion-makers. In the end, I am presenting my personal views.

ECB and digitalisation

Source: ECB

There are several reasons why the ECB is exploring the idea of introducing Euro (fiat) currency in a digital form, such as:

  • Digital cash for EU:s citizens as a mean of payment and transactions
  • Conducting “financial inclusion.”
  • Mitigating and handling the impact of extreme events such as natural disasters or pandemics when “traditional payment services” may no longer function
  • Facilitating and enabling “digitalisation” of the EU:s economy, especially regarding the Eurozone (19 of 27 EU: member states)
  • The digital euro is in accordance with EU:s primary law or Union law, and concerning EU:s single market development.
Source: ECB

ECB and public consultations

Source: ECB

the views of institutions, citizens and professionals will provide valuable input to this assessment, including through public consultation.

One key task for the ECB:s digital euro agenda is to conduct public consultations by gathering information via different organisations, experts, stakeholders — both private and public institutions.

The public consultations have started on 12th October and will finish in the middle of 2021. This process with consultations from private and public institutions such as financial institutions and finance ministers from Eurozone governments will have a vital role in ECB:s decision-making if the whole idea behind digital euro should be implemented or not.

Public consultations process goes together with two other steps which are “conceptual analysis” and “practical experimentation”. Basically, the ECB is conducting its own minimum viable product (MVP).

According to ECB, “comprehensive and balanced policy-oriented assessment of the challenges of a digital euro and its potential relative to alternative options is necessary before issuance of the digital euro can be considered”.

Furthermore, the ECB has stated that “practical experimentation is necessary to test functional design options and explore their technical feasibility, as well as their ability to satisfy the needs of prospective users. Experimental work should involve the private sector and prospective users to the extent necessary and should not pre-empt decisions or commit the Eurosystem to provide a digital euro.”

ECB:s Report on Digital Euro

Source: ECB

The ECB has recently published its “Report on a digital euro”, stating that key part of the Eurosystem’s mission is to provide citizens with riskless money for their payments, also by applying new technologies. According to ECB, a digital euro would:

  • Create synergies with private payment solutions
  • Contribute to a more innovative, competitive and resilient European payment system.
  • Serve as a unifying force in Europe’s digital economies.
  • Be an emblem of the ongoing process of European integration.

As one can see, already at the beginning of ECB:s report, it is stated that ideas about a digital euro are also about political and institutional development. The process of European integration is primary connected to economic aspects as concerning the EU:s single/common market and how EU:s member states are being integrated into common laws and frameworks at the EU-level.

The report presents ECB:s ambitions that a digital euro would support “strategic objectives of the Eurosystem” and “the general economic policies of the European Union” by providing state-of-the-art payment services that reflect people’s changing needs and actively promote innovation in the field of retail payments, complementing private payment solutions.

It is also mentioned that a digital euro could increase competition and accessibility concerning digital payments, supporting financial inclusion, as well as reducing the overall costs and ecological footprint of the monetary and payment systems.

The report is also organised in writings about different scenarios where the digital euro could be operating within and applied to, such for example if the role of cash as a means of payment declines significantly. Also, the report is focusing on different technological aspects such as centralised and decentralised infrastructure, back-end design, end-user access solutions etc.

There are also writings about the eventual usage of a digital euro across the world and also a statement that the digital euro is not a crypto-asset or ‘stablecoin’. Instead, the ECB report states that the digital euro will be a risk-free form of central bank money, meaning digital representation of cash, issued by the central bank.

Source: ECB

Expert views

Source: Blockchain4Europe

Lukas Wiesflecker writes via Medium that the border between decentralised cryptocurrencies and “traditional currencies” under supervision of central-banks “is becoming increasingly blurred”. He mentions examples with Facebook’s Libra virtual currency that is going to be linked to the dollar or euro, socialist-ruled Venezuela’s crypto-currency, and the Swedish central bank testing its eKrona.

Wiesflecker reports that the IT industry association Bitkom has warned that Europe is losing out internationally in the development of digital currencies and that Bitkom demands that the pace of testing a digital euro to be increased significantly. It is also mentioned that some economists in June have called on the European Central Bank and the euro countries to present a roadmap for a “digitally programmable euro” by 2024.

As Wiesflecker writes it, the ECB could provide each EU-citizen with an account where the digital euros are stored, that would be a kind of wallet similar to other crypto-currencies, making it easier for payments to be made only by smartphones. However, according to him, there are risks with digital central bank money because institutions have little experience with digital currencies, and the impact of a virtual primary bank currency on financial stability is uncertain.

Source: Blockchain4Europe

Jonas Gross and Philipp Sandner have written that a digital euro on blockchain already exists. According to them, even if a central bank-issued digital Euro might not be introduced in the foreseeable future, the digital Euro does already exist in the form of digital commercial bank money and e-money.

The authors point out that only a blockchain-based digital Euro will enable Euro-denominated smart contracts as for machines and cars, and that by buying and selling assets and securities it will become much more efficient with a Euro on a blockchain system once the Euro is a token on the system like thousands of other assets and rights.

They argue that for the realm of the machine economy, there is no better way than blockchain and DLT to connect hundreds of millions of devices. Also, they mention that identity management, which refers to the digital representations of individuals, companies, and machines, can be managed on blockchain systems very efficiently.

Regarding the usage of e-euro and “machine economy” the authors are providing several examples such as Commerzbank that already tokenized Euros in digital form and that “eurotokens” have already been used for security transactions. Another example that is mentioned in the start-up CashOnLedger that has developed a market-ready solution for providing a digital blockchain-based Euro built in a consortial version of Ethereum.

Soruce: Jonas Gross and Philippe Sandner

Jens Weidmann, head of Deutsche Bundesbank (Germany’s central bank), is not convinced the time has come for a digital euro and has argued that banks should improve their payment services instead of calling for the state. Instead, he argues that the introduction of a European CBDC has to be “carefully considered”.

Weidmann also argues that one main reason why banks should improve their systems is in order to compete with the growing cryptocurrency market. According to Weidman, a digital euro is not the answer to Facebook’s blockchain-based currency Libra and that while Libra might be of use in developing countries.

Weidmann believes the euro proved its stability for decades and won’t easily get replaced by a social-media-based cryptocurrency. On the contrary, Wiedmann argues that the digital euro itself could be “more dangerous” than Libra due to interests behind the digital euro, its technical design and social approach.

Wiedmann’s position is also that the free-market economy always finds better solutions than government-controlled ones as in China. Thereby, his opinion is that a digital euro is not a must for the EU to compete with China. When it comes to blockchain, his position is that the current blockchain systems are not more efficient than existing centralized systems when it comes to interbank payments between the central bank and commercial banks.

Thomas Mayer from VoxEurope think-tank argues that relaunching the euro as digital central bank currency could help reduce the debt of the euro states and end the sovereign-bank doom loop.

According to Meyer, since the beginning of the Euro area crisis in 2010, it has become clear that the original architecture of European Economic and Monetary Union was unstable and that due to this case numerous reforms have been implemented. Still, political disunity has prevented completion of EMU. Meyer writes that in contrary to popular belief, EMU is still only a cash union, because only the banknotes issued by the ECB and the coins issued by the member states alongside are of the same credit quality in all the member states of the euro area.

Meyer is also making own proposal to “relaunch the euro as digital central bank money” believing that a digital euro offers four important advantages -

(1) a safe European common currency without the need to create a political union

(2) a monetary order less prone to investment boom-bust cycles

(3) an end to the sovereign-bank doom loop

(4) the establishment of the euro as a key international currency.

Personal reflections

  • There are several reasons, both economic and political ones, why the ECB under the leadership of Christine Lagarde is having ambitions of the introduction of a digital euro.
  • The agenda for a digital euro is also about the process of European integration by creating new EU-level structures and systems that will affect the citizens directly.
  • A digital euro and its design could also mean institutional steps towards the introduction of “helicopter money” or “monetary dividend” as a lesson learned from the Euro crisis 2010–2016. It would mean that the ECB could via digital euro wallet provide money directly to citizens during periods experienced as financial crises and hardships.
  • Monetary divided would thereby be an alternative to “easy credits” or quantitative reasoning (QE) policies of providing credits for especially big banks and big companies.
  • The ECB is also aiming to compete or at least to complete initiatives such as crypto-currencies and private controlled virtual currencies as in the case of Libra.
  • The digital euro agenda is not an optimal solution in relation to personal freedom and banking governance. Still, it offers an improvement when it comes to methods and design, plus bad experiences with QE/easy credit behaviours, moral hazard among several larger banks and social distrust in EU:s institutions among many citizens.




I am active as a social and policy entrepreneur. SEEDS ambassador. Motto: I have no identity, I have only identities.

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Vladan Lausevic

Vladan Lausevic

I am active as a social and policy entrepreneur. SEEDS ambassador. Motto: I have no identity, I have only identities.

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