Digital euro issuance: A great opportunity with some risks

Abstract

As new digital payments technologies such as cryptocurrencies emerge, the European Union has sought to provide cohesive and coherent solutions to protect its citizens from the risks associated with such instruments. In this context, this paper discusses the role of a possible digital euro as a tool to serve citizens on the one hand, and to protect monetary sovereignty on the other. To this end, the paper examines recent progress in the domain of central bank digital currencies, and assesses the considerations and risks involved. In particular, it discusses the legislative considerations relating to the possible introduction of a digital euro, ie whether the European Union and its institutions are already endowed with the sovereignty necessary to issue a digital euro, or whether ad hoc legislative intervention is necessary to legitimise the issuance of such a new instrument. The paper then goes on to assess the risks and benefits associated with the issuance of a digital euro. Finally, it will analyse the possible forms that a digital euro could take, evaluating the pros and cons of each. The conclusions will highlight how the introduction of such a new instrument provides an opportunity to be seized and exploited.