The geoeconomics of Central Banks Digital Currencies (CBDCs) the case of the European Central Bank (ECB)

Abstract

In this article, the researcher presents the issue of issuing a central bank digital currency (CBDC), called the "digital euro," from the perspective of the Eurosystem. The digital euro would be a direct commitment from the central bank, presented in digital form, for use by citizens and businesses in retail payments. This digital euro would complement existing paper money and traditional central bank cash deposits. The researcher explains the objectives and benefits of the digital euro, stating that it supports providing citizens with a secure means of payment in a changing digital world, enhancing Europe's path towards innovation, and contributing to its strategic independence by offering an alternative to foreign payment service providers for fast and efficient payments within and outside Europe. The digital euro is expected to become an urgent necessity for individual and commercial transactions in a number of possible scenarios, such as if the use of cash declines significantly or if other electronic payment methods become unavailable due to emergency events. Or if foreign digital currencies begin to widely replace domestic payment methods, in the absence of a digital euro, the Eurosystem will be forced to develop alternative tools to address these potential scenarios. This could deepen the financial exclusion of disadvantaged groups (such as the unbanked) and force direct intervention from the central bank.

This researcher believes that a digital euro could contribute to achieving other strategic objectives of the Eurosystem, including:

1.Providing modern payment services that reflect changes in consumer behavior.

1. Promoting innovation in payments.
2. 3. Expanding options, enhancing competition, and supporting financial inclusion.

The Eurosystem is working to design a system that minimizes potential negative impacts on the implementation of its core functions in the financial sector in particular and the economy in general, as some design choices could impact the role of banks in financial and financing intermediation, particularly during crises and uncertain times.

Accordingly, the Eurosystem continues to conduct in-depth analyses to understand the benefits and challenges associated with a digital euro. The focus is on various types of potential designs, comparing their ability to meet the needs of citizens, businesses, and financial institutions. The digital euro could also be designed to mimic some of the important characteristics of cash in the digital economy, such as the ability to make offline payments alongside online payments.