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Do we need a digital euro, or a digitisation of payments?
With the exception of cash, payments have been ‘digital’ for decades. This raises the question whether the ‘digital euro’, as proposed by the European Central Bank, is actually needed, and if so, where the demand comes from. This opinion paper examines this question from five perspectives — structural, regulatory, monetary, financial and geo-political — and compares the proposed features with the actual benefits. These five perspectives lead to five antagonisms: (1) centralisation of the current two-tier financial system vs market-driven innovations, (2) a standalone digital euro vs the comprehensive European Markets in Crypto-assets regulation, (3) the attractiveness of a digital euro vs its cash-like limitations, (4) a digital euro ‘free of charge’ vs the question of funding, and (5) a competition of currencies vs a competition of payment instruments. While other parts of the world plan to develop innovations with automated payments integrated in cross-industry process chains, the debate about a digital euro seems to forget the ‘voice of the customer’. With this in mind, this paper suggests that a digital euro (as currently proposed) does not provide tangible benefits, and that Europe needs more options for digital payments if it is to stay competitive in today’s global economy.
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Udo Milkau is Head of Strategy and Market Development for the business line transaction banking at DZ BANK. He received his PhD at Goethe University, Frankfurt, and worked as a research scientist at major European research centres, including CERN, CEA de Saclay, and GSI. He is also a part-time lecturer at Goethe University Frankfurt, where he delivers courses in transaction banking, and is a member of the Payments Services Working Group of the European Association of Co-operative Banks (EACB) in Brussels and of the Operation Managers Contract Group of the European Central Bank (ECB).