Physical cash, book money, central bank reserves - and in future also the digital euro: money comes in different forms. Differences arise, among other, from who issues it. Book money is held in private and business accounts and is created by commercial banks. If a bank grants a loan to a private person, new book money is created. Unlike cash, this money is not legal tender, but its value is generally recognised and conversion into cash is always possible. Apart from the central bank reserves that commercial banks hold in their accounts at the national central banks, cash is so far the only form of money that is issued directly by the central bank - and it is accessible to the general public. However, due to the closure of bank branches and the increasing distance to the nearest ATM, access to cash is becoming more difficult in many regions of Europe. The new means of payment is intended to remedy this.

Everything under the sign of digitalisation
Digitalisation extends to all areas of life, including payment transactions. SPACE 2022, a study on the payment behaviour of consumers in the euro area, shows that cash payments continue to be very important, but are becoming noticeably less so. Digital payments, such as online payments or card payments in supermarkets, currently rely on book money. In future, there will be an alternative to this. The digital euro, central bank money in electronic form, could supplement cash payments with coins and banknotes in a consumer-friendly way as a secure and free means of payment. The aim is not only to meet the needs of progressive digitalisation, but also to offer an official alternative to the established electronic means of payment and financial innovations in this area.

The legislative proposal on the digital euro was presented by EU Commissioners Valdis Dombrovskis, Mairead McGuinness and Paolo Gentiloni on 28 June 2023. A central message was that it is by no means about the abolition of cash: all three emphasised emphatically that the digital euro should only complement cash, not replace it. It is to be available both online and offline, and in terms of data protection, it is to meet the standards of cash. With the legislative proposal, the EU Commission has created a framework whose provisions must now be further negotiated by the Council and the European Parliament. However, the ECB is ultimately responsible for the formulation of both details and implementation. It will probably make a decision in October as to whether and when the digital euro will be available. Including the preparatory phase, it could take another three to four years.

How consumers can benefit from the digital euro
A digital euro that works both online and offline, equivalent to notes and coins, would be a significant innovation for consumers. The European Consumers' Organisation BEUC has already proposed eight concrete actions at the end of 2022 on how the rights of consumers can be safeguarded when the digital euro is introduced. Above all, it is important that the interests of consumers are adequately represented. Only then the necessary degree of trust can be bestowed on a digital euro. Another key requirement is the inclusivity of the digital currency. It is not only crucial that the digital euro is free of charge; it must also take into account the special needs of vulnerable groups – access and ease of use for the digitally illiterate or financially excluded, for example. Moreover, traders must be obliged to actually accept both the digital and physical versions of the euro as a means of payment. Among the many advantages of cash is undoubtedly its anonymity. The digital version must therefore also allow anonymous payments, at least up to a certain limit (beyond that, it is also about combating money laundering). And besides the security of payments per se, protection against theft must also be guaranteed.

In an own-initiative opinion, the European Economic and Social Committee (EESC) also calls for the civil society to be involved in the implementation of the digital euro; after all, the everyday routines of EU citizens are comprehensively affected by its introduction.

Further information:
EU Commission: Single Currency Package: new proposals to support the use of cash to propose a framework for a digital euro
BEUC: The digital euro must become the digital equivalent of cash (English only)
EESC: A Digital euro
ECB: Digital euro