The EU Commission presented a legislative proposal for the introduction of a digital euro today. According to the proposal, the digital euro is intended to be a response to the declining use of cash and to ensure access to central bank money for the population even in the digital age. At the same time, it is intended to help secure Europe's digital and monetary independence.
The German banks and savings banks welcome a digital euro in principle. As the digital counterpart to existing cash, the introduction of a digital euro can help to realize the opportunities outlined above. At the same time, wrong decisions in its design entail significant risks and costs for the European economy. "It is crucial to set the guard rails for a digital euro on the basis of a political process as well as society-wide opinion forming," says Marija Kolak, President of the Association of German Cooperative Banks (BVR) in charge of the German Banking Industry Committee (GBIC). "The mandate of the European Central Bank and the concrete design of a digital euro must be transparent and democratically legitimized as well as enshrined in law," Kolak continued.
The European Commission grants the European Central Bank (ECB) the right to set up a comprehensive, centralized and competitive payment system, which includes centralized price setting by the ECB and access to private sector resources. However, the ECB should limit itself to designing the digital euro - like today's cash - as a means of payment and not as a comprehensive payment system.
Only as a cash-like means of payment can a digital euro serve as a basis for the development of innovative European payment solutions and thereby reduce dependencies on non-European solutions. It must build on the already existing division of roles between the central bank and the private sector: The ECB issues the digital euro as a secure means of payment. On this basis, banks and savings banks develop offerings that are tailored to the needs of business and society. Only in this way, the core competencies of both sides complement each other optimally.
It is questionable how the ECB intends to transfer the advantages of euro cash, for example privacy and anonymity, to the digital world by means of an envisaged account-based version of a digital euro. Instead of an account-based version, the ECB should design a digital euro to be cash-like. It would be usable online and offline and could enable irreversible and reliable anonymity "by design. In this way, the trust of citizens and companies can be gained, which is a key success factor for the widespread use of a digital euro.
The German banking industry takes a positive view of the fact that the risks associated with the introduction of an unlimited digital euro have been addressed by the Commission. Holding limits are intended to limit deposit outflows from banks and savings banks and thus effectively reduce the associated risks to financial market stability and the institutions' ability to issue credits. However, it is not acceptable that the Commission leaves the management of limits to the ECB. Rather, limits must be the result of comprehensive analyses.
The proposed qualification of the digital euro as a legal tender with an acceptance obligation can support the success of the digital euro. However, such a requirement must be proportionate and take adequate account of contractual freedom. In addition, the competitive effects on private-sector offerings must be examined and the principles of proportionality must be observed. A mandatory introduction of the digital euro must under no circumstances lead to the substitution of marketable, innovative payment solutions from the private sector.
Kolak continued: "The euro is the anchor for our economic and financial system. Cash remains important. A consensus between legislators, central banks and the banking industry is necessary to strengthen the existing trust in the euro. This also applies to the digital euro as a new form of central bank money." At the same time, it is also important to ensure that the rules governing cash are fit for the future and that the overall picture is consistent.
The associations of the German banking industry will continue to be available for a constructive dialog to ensure that the digital euro is a success for the economy and society in Europe.
