The risks of rolling out a digital euro currently outweigh the benefits and a CBDC should not be introduced unless "new elements " emerge, says a paper prepared for the European Parliament.
While a final decision on issuing a digital euro has yet to be made, the European Central Bank has been busy investigating options ahead of a potential launch, which would come in 2026 at the earliest.Download the document now 378.5 kb (Chrome HTML Document)
Meanwhile, the European Parliament’s Committee on Economic and Monetary Affairs has called in the Economic Governance and EMU Scrutiny Unit to carry out its own assessment.
In a paper, titled Digital Euro: When in doubt, abstain (but be prepared), the unit says that the ECB should continue to explore the CBDC , including carrying out a testing phase.
However, the paper continues, the ECB should "in the end not launch a PDE [potential digital euro] unless new elements emerge strongly supporting such a decision. At the present time, the risks and imponderables of this enterprise are stronger than the arguments in favour of it".
Explaining its conclusion, the unit says that launching a digital euro would put the ECB in a new position: that of offering a new payment instrument in competition with banks and other payment service providers.
"It is not clear that there is a market niche for a PDE, nor that a PDE would have a good chance of establishing itself in today’s highly diversified, competitive, innovative, and fast moving retail payment industry."
A digital euro would also need to hit the goldilocks spot of not being a flop but not being so successful that it would hurt the commercial banking sector. Meanwhile, a digital euro would accelerate a bank run during a crisis because it would offer easy access to a riskless alternative to a bank deposit, says the paper.
Finally, a digital euro is unlikely to increase financial inclusion in the eurozone but could help solve the longstanding problem of the high costs and delays of cross-border workers’ remittances.
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