Central bank digital currencies: Is the crypto euro coming?

Authors: Jonas Gross, Manuel Andersch, Jonathan Schiller (access English PDF version here, German PDF version here)

Following the announcement of Libra and with the start of Christine Lagarde’s presidency, the ECB’s efforts in the area of “central bank digital currencies” (CBDCs) have intensified noticeably. The basic idea behind CBDC is ultimately the transfer of physical cash into the digital world. However, the exact design of a CBDC system is crucial concerning the impact on the banking and financial sector, social acceptance and the monetary policy options of the central bank. In the last two months, the ECB has published concrete CBDC concepts. Although these are not final, they do provide a good indication of where the journey in the euro area could lead. We outline this possible CBDC world in this study. Apparently, banks could play a central role in the crypto euro world and should, therefore, prepare themselves technologically.

Introduction

In response to the emergence of Bitcoin and other cryptocurrency projects, the first central banks began to analyse a possible introduction of their own digital currency as early as 2014. The announcement of Libra in the summer of 2019 (for more details on Libra see Groß, Herz, Schiller, 2019, link here) has further accelerated this process, with more and more central banks now considering the introduction of their own central bank digital currency (CBDC). According to the Bank for International…