Implications of the digital euro | a job

The European Central Bank is doing essential work so that European citizens and businesses can use the digital euro issued by the European Central Bank. Public digital money already exists, but now only commercial banks can use it. The goal is to have an infrastructure so that, as with the physical euro, everyone can use the digital euro and not just banks.

The presence of this infrastructure is the first step in structural reform of the monetary system.

The European Central Bank is doing essential work so that European citizens and businesses can use the digital euro issued by the European Central Bank. Public digital money already exists, but now only commercial banks can use it. The goal is to have an infrastructure so that, as with the physical euro, everyone can use the digital euro and not just banks.

The presence of this infrastructure is the first step in the structural reform of the monetary and banking system whereby the digital euro will be the globally accepted means of digital payment. This structural change will be similar to what happened in the nineteenth century with regard to physical money. Commercial banks stopped issuing banknotes and today all physical money is issued by central banks.

Digital money reform will have many positive effects. Stability will be achieved, because there will be no banking crises, which are the most devastating crises because payments collapse. Banking activities will also be liberalized. As has happened in recent decades in other activities (such as international trade, telecommunications, air transport or market introduction into China), payment and credit services will be subject to market rules.

The main advantage of the digital euro over bank deposits is that the digital euro is money, while deposits are not money, they are a promise to return the money. Digital euros are safe and risk-free assets that cannot collapse payments. Bank deposits, which are not in euros but merely a promise to pay euros, produce crises as soon as banks are unable to fulfill their promise. If the state does not bail out the banks, payments will collapse.

For this reason, the state, in an attempt to avoid banking crises, has accumulated an enormous amount of protection and privileges for banks. For example, guaranteeing their deposits, helping them with liquidity loans, not allowing them to go bankrupt, using taxpayers' money to bail out banks, and many other privileges that make the banking sector the most protected and interventionist in the economy.

State protectionism is very costly to taxpayers, with enormous indirect costs, because, by preventing competition in payment and credit services, they reduce economic growth, efficiency and innovation.

Banking activities cannot be liberalized now, because if deposit privileges are abolished, banking crises will occur. But when the digital euro becomes the means of payment, all these privileges can be revoked without fear.

Because the digital euro, unlike deposits in banks, does not need any protection from the state. The digital euro does not require guarantees on deposits; You do not need liquidity loans because they are money and not a promise to pay money; Does not require public resolution funds, etc.

All liberalizations increase growth, innovation, and the well-being of all citizens, but there are always negative effects. In this liberalization, it is the responsibility of the banks, as they will have to change their business model. It would be reasonable to help banks transform to provide their services on an equal footing where no competitor enjoys state protection.

But we should not pay attention to those banks that ask, as assistance, to put obstacles to the use of the digital euro. Maintaining privileges and adding more hurdles will only mean that banks, instead of transforming, continue to do what they are doing now. We would have continued banking crises and the banking oligopoly would not have disappeared. A digital euro will be a failure.

More than 100 countries are designing infrastructure similar to that of a digital euro. We will see many editing models, but also delayed editing models.

Follow all information Economy And a job in Facebook And sor in our Weekly newsletter