The European Central Bank (ECB) has been encouraged by the Association of German Banks to let commercial banks take the lead in creating the digital euro.
The central bank digital currency (CBDC) was described in a recently published paper as the next logical step in the evolution of money and as a complementary payment method to cash and other digital forms of payment. The association set out to investigate “the next step in the evolution of money,” as stated in the paper.
The bankers pointed out that, but only if correctly launched, a digital euro could provide both customers and the continent’s financial sector with a number of advantages. Due to the already-existing connections between financial institutions and their clients, the association believed that commercial banks should introduce the digital euro into circulation in order to accomplish this.
The document stated: “Based on current business connections, commercial banks know best what their clients need from digital money – and this applies to both consumers and the companies banks are doing business with.
The bankers propose that the ECB allow commercial banks to experiment with the CBDC’s use cases going ahead, impose storage limitations for retail users, and give them the authority to stop organizations from using it as a store of value. According to the study, these actions are required to address the problem of bank disintermediation brought on by the extensive use of CBDCs.
According to the bankers, the ECB should make sure that the digital euro is a better form of cash for retail customers in order to enable a seamless transition into the present financial system. Having capabilities like offline payments without the logistical issues connected with them and complying with European data protection regulations are two ways to ensure that it integrates easily with current banking systems with cash payments.
The ECB has been studying the viability of the digital euro since 2021, and in 2026 it will finally launch the project after a two-year public consultation.
No chance, no gain.
Despite all the advantages brought about by the introduction of the digital euro, the Association of German Banks has still recognized a number of alarming hazards. The group says it will use a variety of countermeasures to tackle the disintermediation danger, which is at the top of the list.
The concerns associated with declining revenues are more urgent since they could limit the commercial banks’ capacity to provide loans to its clients. The risks of deteriorating customer-bank relationships are another concern, but according to bankers, these risks can be “easily managed against with the correct framework conditions.”
