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

What if the European Central Bank launched a digital euro? He is currently actively considering the matter.

The Governing Council of the European Central Bank (ECB) announced last July the launch of an investigation into a digital euro project. Across the world, central banks are under pressure regarding digital currency projects – the UK, Sweden, China have come a long way on the issue. While these initiatives aim to offer a digital currency as a legal means of payment alongside cash, the launch of a digital euro is an important signal for the sovereignty and stability of the European currency.

Offering a safe and legal alternative to speculative cryptocurrencies such as bitcoin, Dr. Wolfram Seidemann, CEO of Giesecke + Devrient (G + D), today discusses the programmability of digital payment options, the use of their future cases and the changes. that commercial banks will need to undertake to accommodate this. digital currency.

Digital currencies are becoming increasingly popular, with figures indicating that more than 110 central banks are currently conducting studies or pilot programs for the development of central bank digital currencies (CBDC). It is therefore not surprising to learn that the ECB is also initiating a research phase for a possible digital euro. Over the next two years, you will explore the applications and impact that the digital euro could have on the European financial system. The ECB will also test the design and distribution to traders and citizens, as well as the changes to be made to European legislation.

Future Features and Possibilities

Commercial banks will play an important role in the realization of this digital euro. As direct partners of the clients of the CBDC ecosystem, they will be responsible for its distribution, while the central banks will manage the creation and destruction of this new currency. This offers many opportunities for commercial banks that will not only maintain their current roles and functions, but will also develop new financial products and services, benefiting their customers through greatly expanded and improved payment experiences. They could, for example, further involve customers through special applications for the use and custody of a CBDC, linking them with new services.

The introduction of a CBDC paves the way for new digital business models and new revenue streams. Automated functions can be used and developed in e-commerce. Linked value chains and smart contracts ensure that the rules stored in the contracts lead to predefined actions for certain threshold values ​​and monitor their execution independently. With a clear separation of responsibilities, commercial banks and financial service providers will not have to fear competition from central banks. Clients will be served in a decentralized manner.

As a new means of payment, the digital euro would help financial inclusion by being available to European and non-European citizens, regardless of their social status and their ability to access a bank account, payments or even the Internet. Unlike cryptocurrencies and stablecoins, the digital euro will offer a safe and legal alternative as a means of payment. It will contribute to economic growth, modernize the payments infrastructure and improve 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 many opportunities for commercial banks.

The case for programmability

One of the emblematic characteristics that links the opportunities derived from the issuance of the digital euro is programmability.

Although a programmable currency is designed with built-in rules, programmable payments allow automatic money transfers when conditions are right. A bit like current orders but with added complexity. Programmable transfers have enormous potential with the advent of this “economy of things” and connected devices like payments can be automated. Money can be sent at the same time services are received. This would dramatically improve business productivity, make transactions much more convenient, and strengthen services, processes, and other workflows.

If you think about it right from the start, a CBDC with programmable functionality will allow for many future innovations. This could open the door to new markets, suggesting entirely new business models. Programmability solutions are needed to form the basis for innovation rather than affect the properties of money itself. The logic of programmability does not have to reside in the core layer of a CBDC, but rather in commercial banks and other financial service providers to improve overall performance and reduce the complexity of an ecosystem around a CBDC. Programmable payments can be activated in secure digital wallets provided by banks, providing value-added services to businesses and customers through CBDC.

A digital currency for a prosperous future

The digital euro will offer new means of payment, combining the advantages of cash with the convenience of the digital world. Commercial banks will play an important role in the distribution of this new currency, creating new services and solutions for their clients. With a CBDC infrastructure worthy of the name and well thought out design, the digital euro could accelerate the economy of things and lead the European Union towards an even more digital future, revolutionizing our relationship with money. While we continue to wait for this digital euro to become a reality, the ECB must now actively work to define the entire framework of this new game to ensure both its economic sovereignty and its role in the global economy.

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