While crypto-currencies are currently on the upswing, particularly in the context of the Covid crisis which has boosted dematerialised payments, the European Central Bank is preparing to launch its own crypto-currency with the digital euro. This fully digital currency has therefore been the subject of a public consultation since yesterday. Christine Lagarde declared on this subject "We must be ready to issue a digital euro if necessary".
As its name suggests, the digital euro is a form of electronic central bank money that would enable both individuals and businesses to make payments on a daily basis in a fast, simple and secure way. To achieve this, the currency will be linked to a digital wallet as explained by the ECB in its report earlier this month. The digital euro would thus complement traditional paper money and is not intended to replace it.
The main objective of this crypto currency would be to guarantee almost instantaneous transactions without communication between banks. The ECB is therefore considering copying the operation of the digital euro on that of other crypto-currencies by means of a block chain, as Bitcoin does.
It is by noting an increasing use of digital transaction tools that the ECB is implementing this idea in order to prevent Europeans from moving towards foreign solutions such as the Libra or the crypto-money developed by Facebook, which push governments to consider such solutions with their own digital currencies. The digital Euro would indeed contribute to the financial sovereignty of the Eurozone and support the international role of this currency.
However, this digital euro could also weaken the traditional banking system in the event of an influx of users to the detriment of their bank accounts. Indeed, the ECB warns: "In crisis situations, when savers have less confidence in the banking sector, liquid assets could be quickly transferred from commercial bank accounts to the digital euro, if it is easier to withdraw money in the form of a digital euro than to withdraw cash. This could increase the risk of mass withdrawals and undermine financial stability" . The Commission is therefore considering limiting the number of digital euros per person.
Finally, this public consultation organised by the ECB is expected to last 3 months. Then will come 6 months of tests and it is only in the middle of 2021 that the ECB will decide whether or not to launch this European digital currency. It will then take 18 months to 3 or 4 years before this dematerialised currency will see the light of day.