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Why might there be a digital euro?
As consumers, our payment behaviour is increasingly oriented towards bank cards, mobile phone and wearables. We are paying with cash less and less often. Only one in five in-store payments are made in cash. At DNB, we believe it is important that cash remains available in the future. That is why we are looking at how to give cash a digital twist by creating a digital euro.
Together, the various central banks in Europe are investigating the possibility of issuing a digital euro in addition to cash. The digital euro is an electronic form of public money – the coins and notes in our wallets. We refer to it as central bank digital currency, or CBDC.
It can help to ensure that everyone in the euro area retains access to a simple, universally accepted, secure and reliable public means of payment, to complement existing payment options.
Cash is public money
Our banknotes are issued by central banks. In the Netherlands, DNB issues them. While the role of cash in payments is diminishing, it is crucial that it remains available, because it offers some definite benefits. You can use it to pay anywhere, or at least in the euro area countries. Cash payments are anonymous, which many people find an attractive feature. In addition, some people find it easier to control their spending using cash, or struggle to manage their finances online.
Digital money
Digital money is not public, but private money. The balance you see in your bank account is on the digital balance sheet of a bank, which is a private company. That money is safe with a bank, because you can always exchange it for cash. Our trust in the financial system is based on this principle. That trust may come under pressure in crises, such as the banking crisis of 2008 or during the current international tensions. The Dutch deposit guarantee protects private money held in a bank account up to €100,000 if the bank should fail (go bankrupt).
Why central banks want to issue central bank digital currency
A central bank's remit is to safeguard financial stability and an efficient, reliable payment system that is accessible to all. Now and in the future. Viewed from this public-interest perspective, the digital euro could eventually be an important addition to existing means of payment, not a replacement. Above all, it must have the characteristics of cash: accepted for purchases anytime, anywhere, accessible to all and easy to use.
The digital euro can also serve as a fall-back payment system, allowing payments to continue when other payment systems temporarily fail.
Furthermore, the globalisation of payments systems requires more stringent security. In Europe, we want to remain independent from other countries and big tech companies in monetary matters.
Privacy
The possible introduction of the digital euro is certainly not about monitoring people’s payments. Central banks are not interested in this in the least. The anonymity of paying with cash could also apply to paying with the digital euro. At the same time, the law provides that we must avoid creating new opportunities for money laundering or other illegal transactions.
EU legislators decide on digital euro
On 28 June 2023, the European Commission presented a draft legislative proposal for a possible digital euro. It is important that the digital euro enjoys political support. European legislators will decide on the proposal. Negotiations are currently underway in Brussels, the Netherlands being one of the discussion partners. The digital euro is also a topic of debate in the Dutch parliament. The digital euro will only be introduced if both the European Parliament and the European Council approve the legislative proposal.
ECB’s preparations
The ECB wants to make thorough preparations, together with the euro countries' national central banks such as DNB, in case European legislators decide that there will be a digital euro. That is why, on 18 October 2023, its Governing Council decided to launch the preparation phase for the possible future issuance and roll-out of a digital euro. This means we will finalise a rulebook of technical rules and agreements for payments. We will also start preparing for the design of technical components. The ECB will make its preparations in two separate stages. After the first stage, which will last two years, the ECB Governing Council will decide whether to move to the next stage. It will decide if and when the digital euro will be introduced once the European Union’s legislative process has been completed.
More information
The European Central Bank's website has the answers to many questions about the digital euro: frequently asked questions on a digital euro.