Mairead McGuinness: Cash is on the decline — is a digital euro the answer?
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Sometimes it seems like everything has gone digital — including money.
Want to contact your bank about your mortgage? Use their banking app. Splitting a bill among friends? Scan a QR code on their phone.
We have crypto, with all its ups and downs, and we saw big tech exploring the launch of their own private currencies.
During the pandemic, we saw an acceleration in the use of digital transactions.
Yet, in Ireland — as in other EU Member States — we have a strong attraction to cash, even if we have adopted strong digital habits too.
Recently, the European Commission adopted two proposals that respond to this increasingly digital world, one to ensure that cash continues to be available, the other to allow for the introduction of a digital euro.
We have been working with the European Central Bank (ECB) on the digital euro project — on how to provide euros in digital format — for some time.
We are not alone in this. Around the world over 100 central banks are also exploring launching Central Bank Digital Currencies (CBDCs).
So the concept of a CBDC is not entirely new. What is new is the proposed legislation that would underpin the design of a digital euro, including how it would be rolled out. But we know that many of us (60%) want to continue to be able to use cash. Yet bank branches are fewer and so too are ATMs, making it difficult to get hold of or even use hard cash.
Our proposal on cash will require Member States to monitor what is happening on the ground and take action where there are unjustified barriers to accessing and using cash. We are leaving this up to Member States because there are significant differences across the EU around cash usage. And Member States are better placed to reflect local preferences and needs.
Already the debate about cash is taking place in Ireland and across the EU.
It’s important that these two proposals on euro cash and digital euro go hand in hand, strengthening access to and the option to use cash, and providing for the digital complement to cash.
It is for the ECB to decide whether to launch a digital euro or not, but it is our responsibility as the EU Commission to provide the legislation that would underpin the project. This process ensures democratic oversight of the development by the European Parliament and Member States.
Like euro cash, the digital euro would have legal tender status as a means of payment. If you already make digital payments using your smartphone wallet, a digital euro would be an additional way to pay, using euro in a digital format that is issued by the central bank. Think of it as cash in electronic form.
A digital euro would have benefits for payment service providers too, who could use the standards of the digital euro for their own instant payment solutions — making it easier for them to grow and expand from a national market into the whole of the EU single market.
And it would also mean that when you’re travelling to another EU country, you wouldn’t have to worry about finding an ATM, or worry about how much the ATM might charge you, or whether your payment card works. Instead, you could use your digital euros.
Our proposal provides for both online and offline use.
So if your internet connection went down, you would still be able to pay another person, or pay for something close to you.
And you wouldn’t necessarily need to have a bank account to use the digital euro. The digital euro will not only be distributed by banks, but also by other payment service providers including public entities like the post office.
Some have raised concerns about privacy — asking if the ECB would know what we are spending our digital euros on. The answer is no. The ECB would not know or have access to this information.
For an online payment with a digital euro, the information you share with your bank or another provider would be the same as for existing electronic or card payments. For offline payments, this would be similar to an ATM cash withdrawal — the payment service providers can only see how much goes in and out of your digital wallet but they would not see the detail of your transactions.
And for those who raise concerns about “programmable” money, the ECB would not be able to restrict the use of a digital euro to stop you from using it for certain purposes.
Above all else, it would be our choice to use the digital euro or not. Just as it is with cash. But we believe that the digital euro will provide added value for citizens and that will encourage usage.
Our proposal for a digital euro raises lots of questions, as it should.
The motto of “be prepared” is important here. While cash is king, its use is in decline so we must address this if we are to keep the option of cash available for use.
Our work on the digital euro, along with the ECB, is to ensure that we prepare, not for now, but for the future.
The euro is the currency of the EU: a symbol of the EU’s strength, solidarity, and prosperity, and it is the second-largest currency globally. Support for the euro in Ireland is 80%, above the EU average.
With our recent proposals on both physical and digital forms of the euro, we are future-proofing the currency for generations to come.
To stand idly by and not propose a digital euro would be a dereliction of duty.
We have done the work, with the ECB. Now we need to listen to the debates in parliaments, in homes, and in workplaces.