Next - Voices from the Future | Euro Digital, a new era for payments
Payment systems are fundamental to the functioning of the modern economy. From simple cash transactions to advanced electronic payment systems, these are the methods by which goods and services can be exchanged. Payments can take many forms: cash, checks, credit and debit cards, bank transfers, and, more recently, cryptocurrencies and other forms of digital money. As technology has advanced, payment systems have undergone a significant transformation, evolving to meet users' needs for speed, security and convenience.
In this context, a new form of payment issued by the Central Bank but digitized, (potentially) blockchain-based, and aimed at being the new standard of the future has recently emerged. We are talking about the Digital Euro, a “central bank digital currency” (CBDC) issued by the European Central Bank (ECB) and available to the general public. This new form of money, which we have also already mentioned in Next, will be similar to cash, but in a digital version, guaranteed directly by the ECB. It will be distributed to citizens and businesses by banks and other payment service providers, including the Post Office or municipalities, without replacing cash. Unlike cryptocurrencies, the Digital Euro will be a central bank currency, secure and stable, exchangeable at face value for euro cash.
The ECB has several goals for the introduction of the Digital Euro. First, to ensure that people, businesses and public entities always have access to a public form of digital currency for payments, accessible and accepted anywhere in the euro area, at any time. This tool aims to avoid relying exclusively on private solutions. In addition, the Digital Euro offers a form of digital money that provides the same level of privacy as cash and is also accessible to those who do not have bank accounts.
Another goal is to promote innovation and competition in retail payments by enabling banks and other payment service providers to develop new solutions for their customers. Finally, the Digital Euro supports Europe's strategic autonomy and strengthens the international role of the euro.
Like any innovation, this new form of payment brings with it advantages and disadvantages. Nevertheless, it seems that the advantages tend to perform much better when compared to the disadvantages.
First of all, the Digital Euro will enable digital payments wherever you are in the euro area, regardless of which commercial bank or payment service provider you use. Users will be able to make payments at any time with instant transfers 24/7, 365 days a year.
In addition, the Digital Euro will also be able to be used without internet access, enabling offline transactions if the parties involved are physically close. This feature is particularly useful for remote areas with unreliable internet connections and where there is a lack of communication networks or electrical infrastructure.
The Digital Euro will also offer more choice to consumers by complementing existing private digital payment solutions. This will contribute to digital and financial inclusion by enabling people without bank accounts to make or receive digital payments and access basic functionality free of charge. Functionality will include conversion of cash to Digital Euro and vice versa, providing greater privacy for users than existing digital payment solutions.
Finally, with regard to security, the Digital Euro will be designed to be secure and fraud-resistant. The ECB will ensure that user data is protected and transactions are secure. In addition, the currency will benefit from the same security measures and legal safeguards as euro cash. This will include protection against counterfeiting and other forms of fraud.
The adoption of the Digital Euro is an important step toward the future of digital payments in Europe. After the adoption of the proposal by the European Parliament and the Council, the ECB is expected to make the final decision on issuance. However, it is likely to be several more years before the Digital Euro becomes a reality (probably not before 2028). When it becomes available, consumers will be able to receive it from their commercial banks or designated public entities in exchange for deposits or euro cash.