ECB official: digital euro is ‘necessary’ in several scenarios in Eurozone

Member of the Executive Board of the European Central Bank Fabio Panetta said in a speech at the ECB conference on Thursday that a digital euro, or the Eurozone’s potential CBDC, could become necessary with evolving consumer preferences, especially if people became reluctant to use cash. In his speech that primarily addressed pan-European payments and also the digital euro, Panetta said the European market was making significant progress due to a “digital revolution.”

In addition to this, Panetta said that cash was accounting for a smaller share of point-of-sale and person-to-person transactions in the euro area. He explained that in terms of the volume of total transactions:

It [Cash] declined from 79% in 2016 to 73% in 2019 . 

He added that in terms of the value of transactions, cash fell from 54% to 48% and that the expansion of cashless transactions has been largely driven by card payments and e-payment solutions dominating remote purchases. The official noted that the trend towards cashless payments has been specially accelerated by the pandemic. Speaking about “a surge” in online payments and a shift towards contactless payments the official stated: 

About 41% of respondents to a recent survey say they have reduced their use of cash. The vast majority of them expect to continue to pay less with cash after the pandemic is over. 

In spite of the aforementioned trend towards being cashless, and relying on electronic payments such as using debit and credit cards; Panetta further added that a digital euro could become necessary if natural disasters caused these heavily relied on electronic payment methods to become unavailable. 

So far, central banks from several nations have made official statements with regard to working on a potential CBDC of their own with China being a major inspiration by starting its testing phase. In fact, Panetta illustrated in his speech that a digital euro would find its use if foreign digital means of payments threatened to displace domestic money. 

He further added that a digital euro would make digital central bank money accessible to everyone and that it would both shape and promote the digitalization of payments. But according to Panetta,  introducing a digital euro also meant facing technical issues, such as cyber risks and the protection of privacy. However, recently, ECB published a report on a digital euro, and launched a public survey to gauge people’s views on its CBDC.