European Central Bank (ECB) plans for a purely digital version of the euro will be deliberately calibrated to not undermine the role of banks in the euro area economy while blocking the risk of Big Tech firms dominating payments, according to Dr Fabio Panetta, a member of the Executive Board of the ECB.
A digital version of the single currency could be launched within four years, if European states and the EU Commission backed the plan, he said.
Unlike cash, the digital currency would exist only online and could be used to make payments between any digital platform without passing through a bank.
Critics fear a digital currency would create privacy risks for individuals because all payments will leave a digital trail. Supporters see a central bank-backed digital euro as a safer alternative to proposals from private companies like Facebook and Apple.
The ECB says it is committed to ensuring its digital currency will be free to use, available to everyone and potentially help fill the gap left as banks reduce branch networks, making cash harder to come by.
Dr Panetta, was speaking at a high-level seminar at the National College of Ireland addressed by EU Capital Markets Commissioner Mairead McGuinness, ECB Chief Economist Philip Lane, Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath. It was organised by Senator Malcolm Byrne.
Consumers are already moving online, creating a risk that central banks will be left on the sidelines if currency technology does not keep up, Dr Panetta said.
"A digital euro would fortify our monetary sovereignty and provide a form of central bank money for making daily digital payments across the euro area, just like cash for physical transactions. To succeed, a digital euro will need to add value for users, foster innovation, and enjoy strong political and societal support," he said.
Prof Lane said the supply of money was “naturally a state monopoly” which the European political system is unlikely to give up even as technology companies push forward with rapid developments in payments technology that could make official currency less relevant.
At the same time, he said, there was a wish not to displace banks which support the economy by converting savers’ deposits into loans. There’s a risk consumers could see a central bank emoney wallet as a safer bet for savings than traditional banks.
The functions of a digital currency will be “limited and proportionate” and the banking system will continue to do its job, he said. That points to development of a digital currency centred on a relatively simple consumer app to hold money and make payments but capped by size and with limited sophistication.