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The ECB’s path to a digital euro

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Photo: Getty

While other economic blocs aren’t so convinced of the merits of issuing retail central bank digital currency, the eurozone is ploughing ahead. In doing so, however, it is having to water down the project to such an extent that its usefulness will be limited.

Most ordinary Europeans haven’t even heard of plans to issue a digital euro. Even in the mainstream financial sector, people are at best lukewarm about the idea.

A key trigger for central bank digital currencies – the growth of private cryptocurrencies, including stable coins – has lost its impact now, as the crypto winter looks like it might become an ice age.

Nevertheless, the digital euro project is gaining momentum. The debate is already shifting from whether the European Central Bank (ECB) should issue digital currency, to how it should best manage the risks of doing so.

Indeed, in a process that brings back memories of the advent of the single currency itself 23 years ago, the digital euro – which the ECB intends for retail as well as wholesale use – seems unstoppable.

The ECB unveiled its initial plans on key design elements this autumn. Large banks and payments companies are likely to play a central role in distributing the currency to consumers and in processing transactions.

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EMEA editor
Dominic O’Neill is EMEA editor. He joined Euromoney in 2007 to cover emerging markets, focusing on central and eastern Europe, Middle East and Africa, and later on Latin America. Based in London, he has covered developed market banking since 2015.