Marking its 25th anniversary on Wednesday, the European Central Bank is preparing a proposal for a digital version of the euro, responding to pressure to develop a technology that could alter the way money is used in the future.
ECB President Christine Lagarde says digital euro could offer people a way to buy things without having to rely on payment services controlled by non-European companies. These could include Mastercard, Visa, Apple Pay and Google Pay.
The European Commission, the executive arm of the European Union, is expected to come up with a proposal on the issue in the coming weeks, officials said at the ECB, which in turn will publish its own proposal in October.
Central banks around the world, including the US Federal Reserve, are cautiously studying the possibility of issuing digital currencies now that many of the payments are made electronically instead of cash. Some small economies like Nigeria, Bahamas and Jamaica are already using digital currenciesand China is in rehearsals.
Central banks are also responding to the rise of cryptocurrencieswhich have raised fears that people will turn to rival types of digital money capable of detracting from national currencies.
A central bank-backed digital currency would be a more secure and stable form of payment than cryptocurrencies, which are more volatile and whose collapse in recent months has sparked calls for more regulation. The EU became a world leader when last week it gave final approval to rules to regulate the crypto sector.
As Europe considers issuing a digital euro, the bigger question is: How will it improve what is already available to consumers?
“No one can answer that question, not even the ECB,” said Philipp Sandner, director of the Blockchain Center at the Frankfurt School of Finance and Business Administration.
“As a user, I would ask myself, ‘what is the benefit, why do we need another solution?’”
Apple Pay, for example, allows people to pay simply with the touch of their cell phone, an easy experience that the digital euro should emulate.
“Youit should be something so easy to use like Apple Pay or Mastercard, and that’s hard. Otherwise, no one is going to use it,” Sandner added.