More and more, we pay digitally with our bank cards or cell phones and we use less and less cash. In the Netherlands, only 1 in 5 payments are still in cash. Still, in some situations, it remains convenient to have some form of cash available. This is why European central banks are currently exploring how cash can be given in a digital form with the introduction of a digital euro.
Why this is important:
The world is digitizing. Our money transactions also take place mostly digitally. But there must remain room for offline payments.
Although the role of cash in payments is diminishing, its availability remains important because of its advantages. Cash can be used anywhere: offline, especially in euro countries, and payments remain anonymous, which many people appreciate. In addition, cash gives many people a better overview of their spending and provides a solution for those who have difficulty digitizing financial matters.
Offline payments
The current “digital euros” in a bank account are issued by commercial banks and represent a claim by the consumer against the bank. In addition, there is cash – euro coins and bills – issued by the European Central Bank (ECB). The digital euro will act as a digital equivalent of cash issued by the ECB.
The ECB aims to ensure that in offline payments with digital currency, no one except the two parties involved will have insight into the transaction. In a recent update on the e-euro, the ECB reveals that in the future, payments can be made through a digital wallet, also known as a wallet. You can put money in it that you get from an ATM, for example. Another possibility is to link your wallet to your bank account, where banks may not charge fees. Payments can then be made using your phone or possibly a smart card, although the exact form of this has not yet been determined. The ECB is also considering setting a cap on what you can have in your account, but the amount has not yet been determined.
Major advantage
A major advantage of the digital euro is that we will become less dependent on digital currencies from foreign companies, such as Facebook/Libra or large platform companies, and the Chinese e-yuan. Digital currencies from such large parties can affect the monetary autonomy of the euro. With a digital euro, we retain control within Europe.
European politics
European politicians will decide on the bill for the digital euro. It is currently being negotiated in Brussels, with the Netherlands also at the table.
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