FECIF - The European Federation of Financial Advisers and Financial Intermediaries

Editorial - October 2021

Vania FranceschelliVania Franceschelli
Deputy Chairwoman

What do people think about a digital Euro?

What are the opinions of European citizens on a digital Euro? The picture offered by the European Central Bank public consultation sheds some light.

The Eurosystem, which comprises the European Central Bank and the national central banks of the Member States., has recently published the results of a consultation, that ended in January 2021, asking for European citizens and companies to provide their views and opinions on the benefits and challenges regarding the introduction of a digital Euro. These results will serve as an input for the ECB’s future decisions on the matter.

What are the main characteristics that citizens require to take into account for the introduction and design of a digital Euro?

Privacy has emerged as the most important feature, for both citizens and professionals, with 43% of respondents giving it the top rank in terms of relevance. The Eurosystem proposes two different types of digital Euro. The first one has only an offline nature, in order to respect privacy to the highest possible degree. The second possibility entails a hybrid nature, both offline and online, with innovative characteristics and additional services. In this case preferences diverge slightly between citizens and professionals, with the former supporting an offline-only Euro and the latter choosing a hybrid one.

In addition, respondents focused their attention on two further challenges: making the digital Euro an accessible and practical payment method and allowing it to function correctly in areas with low quality internet connectivity.

The integration with existing payment solutions is another fundamental factor. Financial intermediaries shouldn’t be substituted by the digital Euro, but must be involved in playing a role in the provision of digital Euro services, integrating them with existing banking and payment systems. All respondents agree in assigning to banks and financial intermediaries licenses and a supervision role to ensure adequate protection for single users from the abuse of data and security risks.
The respondents recommend the implementation of innovative solutions to prevent technical errors and falsifications. It’s extremely important that the amount of digital Euro issued by the European Central Bank is the same as the amount of digital Euro circulating in the economy. Blockchain and cryptography are among the best tools for this purpose.

Moreover, when talking about privacy, both citizens and professionals support the security obligations in order to prevent illegal activities; only one respondent in 10 expressed themselves as being in support of anonymity for digital Euro users. Despite the last statement, privacy regarding payment data remains the top-ranked issue to take into account with regards to digital Euro implementation.

A further point of discussion concerns the technical solutions to be adopted in order to ease digital Euro use. Almost half of citizens in the sample of respondents consider that the best way to facilitate cash-like features in the use of the digital Euro is to provide adequate end-user solutions. In particular, a quarter of the respondents prefer hardware, primarily (smart) cards or a secure element in devices such as smartphones. Nearly one in ten citizens prefer to have a software solution like a wallet or a mobile application that would allow for cash-like use of a digital Euro. Only a few of them consider that a combination of software and hardware solutions should be provided. Around a third of citizen respondents believe that cash-like features should be supported by the back-end infrastructure, especially if a decentralised infrastructure (including Blockchain) is considered.

The majority of the professional respondents are of the opinion that end-user access solutions are best suited to facilitate cash-like features, either alone or in combination with appropriate back-end infrastructure. A third of professionals propose a combination of software (e.g. wallet, app) and hardware solutions (e.g. card, secure element in a device, dedicated storage or device).

Citizen respondents show a strong preference for being able to use a digital Euro on their mobile phones, whereas professional respondents point out a broader range of hardware and software solutions.

The Eurosystem has then expressed another important concern: it is fundamental to identify the appropriate tools that could be used to avoid digital Euro excessive use as a form of investment and the associated risk of large shifts from private money to digital Euro.

Most respondents specifically mention the need for either holding limits or tiered remuneration, or a combination of both, to control the amount of digital Euro in circulation. At the same time, about a third of them are against the introduction of any tools to restrict the amount of digital Euro in circulation.
When referring to the specific topic of applying tiered remuneration to digital Euro used offline, most respondents suggest that an offline digital Euro should simply not be subject to this. It’s a valid point as this measure could cause systemic damages and inequalities among financial institutions.

Furthermore, the digital Euro could become an efficient tool to address current inefficiencies in cross-currency and cross-border payments through improved interoperability across countries and their respective currencies.

Citizen respondents show great interest in the speed of cross-border payments (more than a quarter of respondents highlight the importance of instantaneous settlement), cost (a quarter of respondents mention that costs should be low) and exchange rate transparency. Professional respondents focus mostly on the issue of interoperability and the role of intermediaries, either as settlement agents or, to a lesser extent, as gatekeepers.

Lastly, when asked about taking an active role in the digital Euro implementation, most citizens say they will be ready to support a digital Euro, for instance by simply adopting it, testing it or contributing to its design. A substantial share of professionals responding to this question mention their role in supporting the digital Euro through its usage, promotion or research. A quarter of the professionals are willing to provide technical support for the design and uptake of a digital Euro, through either end-user access solutions (especially software but also hardware) or design and infrastructure development.

Only a minority of both citizens and professionals state a clear opposition to the issuance of a digital Euro, mainly because they do not believe in its success.

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