Can we spare a cashless euro?

with Maria Demertzis

What are the implications of the rise of global private stablecoins? 

The emergence of cryptocurrencies (first generation) and stablecoins (second generation) has brought the possibility of having digital private money substitute actual public money. This is an interesting idea, as it decouples money from borders and allows global usage. However, this is not without problems: separating money from the sovereign fails to meet the three functions of money as a unit of account, a medium of exchange and a store of value. Far from being stable, their volatility has meant that at least for the moment these currencies behave a lot more like assets than conventional “money”.

What is your take around the discussion of a potential digital euro?

If this were to happen then central banks would have to digitalise established “money” to enable it to have the extended reach that cryptocurrencies offer. This becomes interesting as our societies become increasingly digitised and the demand for cash falls. One could envisage a world in which the demand for actual cash disappears.

What is the role that public central bank digital currencies could play and what is the recent assessment by the ECB on the issue?

For cash to totally disappear then digital euros (for example) would have to mimic its properties: anonymity, return, and being readily available as the “asset of last resort” when trust falls. These (and other challenges that have to do with the need for the ECB to actually have electronic deposit accounts) are a few of the issues that need to be very clearly thought through. They could change the role that a central bank plays in financing the economy and even alter the role commercial banks play in creating money through credit. Although not necessarily problematic, it requires a thought out new architectural set up. The ECB is making a very clear attempt tackle these challenges and address the need to become digital but without moving very far from our current architectural set up. I consider this to be a start.

Maria Demertzis is deputy director at Bruegel.

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