The impact of the digital euro on the future prosperity of Europe

What if the European Central Bank launches a digital euro? Now she is actively considering this issue.

The Governing Council of the European Central Bank (ECB) announced last July that it had launched an investigation into the digital euro project. Around the world, central banks are under pressure for digital currency projects – the UK, Sweden and China have made significant progress in this matter. If these initiatives aim to offer digital currency as legal tender alongside cash, the launch of the digital euro will be an important signal for the sovereignty and stability of the European currency.

Offering a safe and legal alternative to speculative cryptocurrencies like bitcoin, Giesecke + Devrient (G&D) CEO Dr. Wolfram Seidemann today discusses the possibility of programming digital payment options for future use and the changes commercial banks will need to make to adapt to this digital currency.

Digital currencies are becoming more and more popular and figures show that over 110 central banks are currently conducting research or pilot programs to develop Central Bank Digital Currencies (CBDCs). Therefore, it is not surprising to learn that the ECB is also starting an investigation phase into a possible digital euro. Over the next two years, she will explore the applications and impact that the digital euro could have on the European financial system. The ECB will also review the design and distribution to merchants and citizens, as well as amending European legislation.

Future roles and opportunities

Commercial banks will play an important role in providing this digital euro. As direct partners of clients in the CBDC ecosystem, they will be responsible for its distribution and central banks will manage the creation and destruction of this new currency. This opens up many opportunities for commercial banks to not only retain their current roles and functions, but also develop new financial products and services that benefit their customers through improved and widely expanded payment methods. They can, for example, additionally attract customers with special applications for the use and storage of CBDC, and connect them with new services.

The introduction of CBDC paves the way for new digital business models and new revenue streams. You can use and develop automated functions in e-commerce. Connected value chains and smart contracts ensure that the rules stored in contracts lead to predetermined actions for certain thresholds and independently control their execution. With a clear division of responsibility, commercial banks and financial service providers will not have to fear competition from central banks. Clients will be served decentralized.

As a new means of payment, the digital euro will help expand financial inclusion, as it will be available to European and non-European citizens, regardless of their social status and their ability to access a bank account, payments or even on the Internet. Unlike cryptocurrencies and stablecoins, the digital euro will offer a safe and legal alternative as a means of payment. This will help economic growth, modernize the payment infrastructure and increase the efficiency of payments, along with cash without replacing it. As a platform for the growth of the digital economy, the digital euro will open up new markets and open up many opportunities for commercial banks.

Case of programmability

One of the main features linking the possibilities associated with issuing a digital euro is programmability.

Although a programmable currency is designed with built-in rules, programmable payments allow for the automatic transfer of money when certain conditions are met. A bit like current orders, but with added complexity. Programmable transfers have huge potential with the advent of this “savings of things”and devices connected as payments can be automated. Money can be sent at the same time as services are received. This will significantly increase business productivity, make transactions more convenient, and strengthen services, processes, and other workflows.

If thought right from the start, a programmable CBDC will enable many future innovations. This can open the door to new markets, offering entirely new business models. Programming decisions are needed to form the basis for innovation, not to influence the properties of money itself. The programmability logic does not have to be at the core level of the CBDC, but should be linked to commercial banks and other financial service providers to improve overall performance and reduce the complexity of the ecosystem around the CBDC. Programmable payments can be run in secure digital wallets provided by banks,

Digital currency for a prosperous future

The digital euro will offer new payment methods that combine the benefits of cash with the convenience of the digital world. Commercial banks will play a big role in spreading this new currency by creating new services and solutions for their clients. With a CBDC infrastructure worthy of its name and a well-thought-out design, the digital euro has the potential to accelerate the economy of things and move the European Union into an even more digital future, revolutionizing our relationship with money. While we are still waiting for this digital euro to become a reality, the ECB must now actively work to define the entire structure of this new game in order to secure both its economic sovereignty and its role in the global economy.