THE DIGITAL EURO, OPERATIONAL CONSIDERATIONS

The single European currency project is now 20 years old. Since 1 January 2002, European citizens in 19 countries have been able to do business with a single currency.

During these years, two types of euro have coexisted in the euro area: the currency of free circulation among citizens coordinated by financial institutions, and the digital euro restricted only to capital flows between banks and the European Central Bank (ECB).

Today we are closer to the opening up of the digital euro for use by the entire population, i.e. the ability of citizens to also carry out transactions with euros issued by the ECB. This will be possible through traditional financial institutions, or through ECB digital wallets that are independent of the financial sector. These digital wallets will be useful for simple citizen-to-citizen payment processing (similar to traditional banknotes or coins, “held in digital form”) whether or not an internet connection is available.

Nevertheless, we will also be able to make use of the digital euro with the same banks with which we usually have our bank accounts. These banks will also provide us with customer service, value-added products, and similar services to what we are used to with their online banking.

In short, the digital euro will provide:

A centralised digital currency with the full guarantee of the European Central Bank.
A means of payment for all citizens, at no cost and with total reliability.
Basic and independent payment solutions, without dependence on external institutions.
Privacy for users: in such a way that private companies, banks or payment entities do not have access to information on citizens’ spending behaviour.
Monetary independence for Europe against other digital currencies issued by other central banks or private entities.
Ability to integrate with other commercial payment gateways.
Ease of choice for each transaction between traditional euros and digital euros issued by the European Central Bank.

How will I be able to use the digital euro?

The digital euro will be available through a European Central Bank digital wallet or through traditional commercial banking products.
Payments will be possible online, directly between individuals via QR code or NFC technology, or by linking it to a physical debit or credit card from a commercial bank.

Does this mean the end of bank accounts?

No. It will not replace the private sector in the area of innovative banking products and services.
Direct operations with the ECB will only be used for payments and simple transactions.
Commercial banks will also offer customer service and a wide range of banking services, such as transfers, purchase/sale of listed stocks, foreign exchange, direct debit and bill payments, etc…
The financial institutions will also be in responsible for carrying out protocols for the identification and onboarding of new customers (KYC), anti-money laundering controls (AML and TF) and providing information and answering queries about its use.

In which ways is the digital euro different from a cryptocurrency?

The digital euro is defined as a digital currency issued by the European Central Bank with a single, centralised ledger. However, cryptocurrencies are based on a decentralised ledger (DLT) without the backing of any institution to guarantee their authenticity, support or guarantee that they will be used for legitimate purposes.
The digital euro is backed by the European Central Bank, offering a full guarantee of liquidity and solvency of the funds of Europeans. Cryptocurrencies, whether stable or open-market digital currencies, are independent projects and their conversion into a fiat currency is always subject to private exchange houses or to the availability of third party users who wish to carry out such an exchange.
The stability of the digital euro will be the equivalent of the traditional euro, being one of the 3 largest currencies in the world and supporting the European economy. However, cryptocurrencies do not have any backing, nor do they represent any specific country, and their value fluctuates enormously over time, and there is no certainty about their viability as a long-term project.