Today's decision by the Governing Council of the European Central Bank (ECB) to move its project to develop a digital euro into a preparation phase is viewed positively by the German Banking Industry (GBIC). "A properly designed digital euro can offer added value for the European economy and society. It can increase European sovereignty in payment transactions, support the ability to innovate and - for example through an offline functionality - strengthen the functionality of payment transactions even in crisis situations," says Tanja Müller-Ziegler, Member of the Board of the Federal Association of German Cooperative Banks (BVR), in charge of GBIC. "The digital euro must not be introduced hastily. Negative effects on the economy and society must be avoided and the digital euro must be widely accepted among the population. Therefore, it is important that the ECB and politicians take sufficient time to democratically discuss the topic," Müller-Ziegler continues. In particular, the ECB should also take the legislative framework into account in continuing the preparatory phase and not create a fait accompli. It is also correct that the ECB has clearly spoken out against abolishing cash. The digital euro will thus be a digital supplement to, and not a replacement for, existing cash.
The social and political discourse between the ECB and the stakeholders, which is only slowly beginning, shows that the consequences of the various design options of a digital euro have not yet been sufficiently clarified. Decisions on the introduction of a digital euro and its design must, however, be made based on extensive and well-informed debates and legitimised in the political process. The preperation phase now launched by the ECB could support this by enabling an open reflection on the results of the ECB project so far, allowing for revisions of previous plans and bringing them even more in line with the needs of the various private and public stakeholders.
It is essential to look at the risks. "Under no circumstances should risks arise for financial market stability and the lending capacity of credit institutions," Müller-Ziegler said. A badly made digital euro would have the consequence of serious outflows of deposits, which would endanger the refinancing ability of the banks and increase the financing costs for the national economy. Likewise, this could lead to a threat to the stability of the banks. Therefore, the German banking industry considers a quantitative impact analysis for different design options of the digital euro to be imperative.
According to current ideas, the ECB is planning to introduce a new payment system and thus a fundamental intervention in the market. The distribution of roles between the state and the private sector as well as between the central bank and commercial banks would be called into question by the introduction of a new payment system operated by the ECB, which would raise fundamental regulatory questions and go beyond the mandate of the ECB.
A digital euro can only create added value for Europe if it is designed appropriately. In the view of the German banking industry, this would best be achieved by a digital form of cash. "As a digital counterpart to cash, the digital euro should transfer its characteristics into the digital world and be able to be integrated into the existing landscape of innovative and efficient payment transaction solutions of the private sector in the sense of a new means of payment," says Müller-Ziegler. In addition, a legally anchored holding limit in the lower three-digit euro range must apply to the digital euro in order to prevent risks to financial stability.
