Journal of
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Archive » April 2021 » The digital euro, a challenge to banks?

The digital euro, a challenge to banks?

Paolo Mottura
April 2021 - n. 4
Keywords: Banche, euro digitale, moneta
Jel codes: E42, E51, E58, G21, G23

The Ecb is studying a project for the introduction of digital banknotes. The proposal of a digital safe asset could have several advantages: to counter the risk of entry of digital currencies of foreign central banks and private stablecoins; to extend the international use of the euro; to increase the effectiveness of monetary policy. The envisaged scenarios are not fully convincing, and proposed technical solutions could have several critical issues. In particular, the Ecb's approach aimed to offer to the general public digital euro accounts, equipped with retail payment services, could have a highly competitive impact on banks' main activity, based on the joint production of credit and money. The digital euro would entail bank deposits, reducing the supply of credit. If the relationship between the Ecb and the banks were to become competitive, the consequences would be very significant, with serious risks of financial instability.

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