Evelien Witlox (ECB): The Digital Euro Will Not Replace Cash

The digital euro is a project of the European Central Bank that leaves much room for speculation and various theories, especially regarding user privacy. The Croatian National Bank gathered a number of experts in economics at the conference ‘Digital Euro and Central Bank Digital Currency’ to discuss this project.

– The concept of central bank digital currency (CBDC), including the digital euro, is extremely interesting and challenging, and it raises a large number of questions that we aim to answer at this conference. The introduction of central bank digital currency is currently being considered in a hundred jurisdictions around the world, and the motives for exploring the establishment of a digital version of public money intended for citizens vary from country to country, just as the approaches to CBDC do. It is important to emphasize that with the introduction of the digital euro, cash payments will still be possible; the digital euro will not replace cash but will represent a digital form of cash that can be used offline, transferring money from mobile to mobile even when not connected to the internet. In order for our common European currency to continue to meet the needs of users, it must develop in accordance with the wishes of citizens, stated the governor of the Croatian National Bank, Boris Vujčić.

The governor emphasized that cash enables inclusivity and privacy in payments, and the digital euro would enable them in digital form as well. – If the digital euro is introduced, our financial transactions will be simpler because we will be able to choose a secure means of payment that is accepted throughout the euro area. Everyone in the euro area will be able to pay with the digital euro for free, just as they currently pay with cash, Vujčić said on that occasion.

During two panels focused on presenting the digital money project, panelists sought to bring the discussion about the introduction of the digital euro and digital central bank money closer to the audience. One of the speakers was also Evelien Witlox, director of the digital euro program at the European Central Bank.

Witlox emphasized that the use of cash in the euro area is decreasing and highlighted the uniqueness of the digital euro as a combination of the practicality of central bank money and the advantages of digital payments. – The digital euro would be widely accepted throughout the euro area as an additional option alongside cash payments and other existing payment methods. With the digital euro as a pan-European solution under European leadership, the strategic autonomy of Europe would be strengthened, reducing our dependence on non-European payment service providers and fostering innovation and market competition in the European payment sector, Witlox said.

Digital Wallet

The digital euro is essentially central bank digital currency (CBDC), an electronic version of cash. It would be issued by the central bank and would be available to everyone in the euro area. It would not require internet access and would be a completely free electronic means of payment. It should enable simpler payments when traveling or shopping online, as well as in other transaction sectors. Witlox emphasizes user privacy as a priority, as transactions will not be able to be linked to individuals. Data in the system will be anonymous and will fully comply with GDPR and other regulations regarding the confidentiality of private information.

When using the digital euro, users will be able to transfer money from their bank account to their digital wallet, which will be either an app or a physical card for those who have difficulties with digitalization. Another advantage of the digital euro is that everyone who accepts digital payments will have to accept the digital euro, which was also emphasized by Governor Vujčić.

The digital euro project is currently in its second, preparatory phase, which began in November 2023 and is planned to last until October 2025. Other countries have also joined the discussion about introducing the digital euro, with Sweden being one of the first. The Croatian National Bank is one of about a hundred central banks worldwide developing the possibility of a central bank digital currency. Witlox believes that many actors have engaged in the project and that the digital euro is essential for the euro and that its introduction strengthens the monetary sovereignty of the euro area.

Panel participants, renowned experts involved in the implementation of these projects, representatives of central banks, the academic community, and the private sector, jointly attempted to answer some of the most important questions related to CBDC and the digital euro.

Sandra Švaljek, deputy governor of the Croatian National Bank, moderated the panel ‘Digital Euro,’ which was dedicated to discussing the Eurosystem’s project on the introduction of the digital euro. The second panel ‘Central Bank Digital Money’ was opened with an introductory presentation by Geoffrey Goodell, a professor at University College London, and was moderated by Ivan Mortimer Shutts, an advisor at Dataswyft, and Linardo Martinčević, an advisor in the Governor’s Office and FinTech coordinator at the Croatian National Bank. The second panel discussed the motives and approaches of different countries regarding the establishment of a digital version of public money intended for citizens, along with a comparative overview of the previous efforts of some of those countries regarding CBDC.

The speakers agreed that European citizens need to be better educated on this topic, especially regarding instant payments, and that the digital euro should be inclusive. If this ambitious project comes to fruition, citizens of the European Union will have to wait a few more years, as after the current preparatory phase, a decision by the European Central Bank on trial use will follow.