ECB will position the digital euro as a means of payments, not savings

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A member of the executive board of the European Central Bank believes that if the state digital currency is used for savings, it will harm banks and the fiat euro.

Fabio Panetta, speaking at the Royal Institute for International and Strategic Studies Elcano in Madrid, said that the state digital currency should be an attractive means of payment, but its properties should
hinder him to become a tool to protect against inflation and capital accumulation. Otherwise, it will become a threat to private banks and fiat currencies. Therefore, when issuing a state digital currency, this aspect must be taken into account.

“As people begin to use cash more as a store of value rather than a means of payment, government digital currency should allow them to use central bank money as a medium of exchange in the digital age.”

According to Panetta, the state digital currency and fiat money will complement each other. This will allow central bank money to remain the financial anchor for the payments ecosystem. An ECB board member noted that fiat money is being used less and less to pay for goods and services as consumers increasingly make payments online. Online sales in the euro area have doubled since 2015, he said, and now only about 20% of cash is used for payments, up from 35% 15 years ago.

The European Union, unlike the United States, China and other countries, adheres to a cautious policy regarding the launch of the state digital currency, avoiding the possibility of causing harm to business. For this, at the end of October, a consulting group was formed to launch the digital currency of the Central Bank with experts from the business community. Despite the apparent loyalty, the ECB does not intend to transfer the issue of the state digital currency to private companies.

Not all European banks are equally supportive of the launch of the digital currency of the Central Bank. The head of the digital regulation department of BBVA in Madrid, Pablo Urbiola, believes that the level of demand for the state digital currency has not yet been determined, and it is unclear whether it is needed with an abundance of financial instruments.

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