BY JOHN ELLIS, FINANCIAL ADVISOR
The European Central Bank (ECB) is developing a ‘digital euro’, a new form of money you could use via your phone or card, much like cash but electronic. The ECB began planning in 2021, started a two-year preparation phase in November 2023, and intends to launch by 2028. It will work across the 20 eurozone countries, including Ireland, and be backed by the ECB to ensure it is safe and dependable.
Imagine it as a digital version of the notes and coins in your wallet, accepted in shops, online, or for paying friends. Why introduce a digital euro? Are we not already using cards and/or apps to pay especially since Covid-19?
In the EU, digital payments soared from €184 trillion in 2017 to €240 trillion in 2021. But the ECB wants Europe to depend less on American firms like Visa or Mastercard and keep pace with countries like China which has its own digital currency. It also aims to ensure public money, euro issued by the ECB, remains relevant as private cryptocurrencies are gaining traction.
The digital euro is designed for ease of use. You could pay at local shops, online, or even pay your taxes. It will function offline, which is great for rural areas with unreliable internet. Privacy is a priority, so the ECB promises your spending details will stay private unlike some apps that track purchases. To protect the banks there will be a cap on how much digital euro you can hold, likely to be in the region of €3,000 to €4,000. However, concerns exist: some fear hackers could target it, and others worry it might reduce the use of cash which could inconvenience those who prefer physical money.
In Ireland awareness is low. A recent survey found many Irish people know little about the digital euro which could hinder its roll out. And a 2024 survey of Irish compliance experts revealed 71% are concerned about cyber attacks targeting consumers and businesses. Only 6% having no worries with 58% seeing the benefits like faster more convenient transactions.
The digital euro could transform payments for us all, making them smoother and bolstering Europe’s financial system. Yet, success depends on people understanding it. The ECB needs to increase efforts to educate us addressing our fears about security and ensuring cash always remains an option.
The ECB is engaging with the public and businesses, but not enough. According to their website www.ecb.europa.eu: “In parallel, the ECB has concluded a call for applications, launched in January, for selecting potential providers of digital euro components and related services. The ECB has invited selected bidders to tender. The outcome of this procedure will be published on the ECB’s website when it has been finalised in 2025.”
Even so the ECB must do more to explain why we need the digital euro. It will be a significant sea change for those not familiar with existing digital offerings, so there should be significant and clear communication why a digital euro could benefit us all from local shops, everyday shoppers, and the overall business community.
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