A Digital Euro has been at the forefront of the minds of board members at the European Central Bank (ECB) for the past several years. 

The Central Bank Digital Currency (CBDC) has often been cited as the next evolution of the increasingly digitised payments landscape, offering near instant transaction settlement and a digitised form of cash that can coexist with its physical counterpart. 

In a blog post on the ECB’s website, Executive Board Member Pietro Cipollone outlined why a Digital Euro is needed for Europeans to enable greater freedom of choice when it comes to paying for goods and services.

He shared: “We remain fully committed to cash, but we want to bring its benefits into the digital world. A Digital Euro would give consumers an additional payment option that complements cash. It would be up to them to decide whether to use it. 

“A Digital Euro would combine the convenience of digital payments with cash-like features. Like banknotes, it would offer Europeans the freedom to use a single public means of payment accepted throughout the euro area for digital payments in shops, on e-commerce websites or person to person. 

“It could also be used offline, making transactions possible even when network coverage is limited or in the event of a power cut.”

Many financial policy leaders across the globe have been exploring the possibilities of CBDCs. Japan, India and China for example, are further along in their CBDC developments, launching pilot projects to test the waters of its wholesale and retail value. 

The US, in particular, is currently in an ongoing battle on whether to enact on CBDCs as the rest of the world, with Joe Biden a keen supporter whilst his electoral opponent Donald Trump promising to dispel any notion if he were to be elected in November. 

One benefit CBDCs provide, according to Cipollone, is bringing greater financial accessibility to Europeans in digital form to help solve the problem if a payment method or service is not provided by a merchant. 

He explained: “Sometimes we can use national options, such as bank cards or digital wallets, to make electronic payments in shops. 

“But in most euro area countries, these national solutions do not exist. And even when they do, they often do not work when shopping online, splitting bills among friends or travelling in the euro area. This forces us to rely on non-European cards or electronic payment solutions – although even these are not always accepted – and to use multiple payment methods.”

Many critics of CBDCs alike have cause for concern over privacy issues when it pertains to transaction tracking, as well as inclusivity towards the older generations. 

Whilst each and every CBDC case is not a one-size-fits approach, as many markets and consumers require certain infrastructures and payment requirements, Cipollone quelled any concerns of inclusivity issues pertaining to all demographics. 

The ECB Executive also revealed that there will be enhanced security measures in place to ensure that a Digital Euro would not be compromised due to government interference, enabling merchants and consumers to freely use it without concern. 

“The Digital Euro would offer greater privacy than that typically offered by existing commercial solutions. For offline payments, only the payer and the payee would have access to the transaction details,” continued Cipollone. 

“For online payments, we would use the latest privacy-enhancing technologies. All data would be pseudonymised and kept within the EU’s jurisdiction, thus enjoying the highest privacy standards in the world. And our compliance with data protection rules would be supervised by independent data protection authorities. 

“Free of charge for basic use, a Digital Euro would leave no one behind, including those with low digital and financial skills and vulnerable groups. An app would offer everyone an inclusive and accessible means of payment.”

A Digital Euro for merchants also represents a seamless transaction method that could significantly streamline the checkout process without the need for third-party intermediaries. 

This was also cited as another core objective for the ECB in its efforts to move with the times and embrace the digital payment evolution to its furthest extents.

Cipollone concluded: “As the world around us changes and geopolitical risks grow, we need to keep up the momentum. Together, we can ensure that the euro – our single currency – is ready for the digital era and continues to underpin the freedoms Europeans hold dear.”

In a recent panel discussion at the Money 20/20 Europe event, industry experts were brought together to discuss some of the challenges in the way of CBDC adoption and how global leaders can increase this.