Digital Euro: opportunity or (legal) challenge?

in Ianus: Diritto e Finanza (2021), (22), 27

In the euro area today, there are two ways in which the central bank provides money to its economy. The first consists in the issue of physical banknotes, while the second is expressed through the ... [more ▼]

In the euro area today, there are two ways in which the central bank provides money to its economy. The first consists in the issue of physical banknotes, while the second is expressed through the electronic accreditation of deposits on current accounts that credit institutions hold at the central bank. In the last five years, following both the increase in the digitalisation of the modern economy and the example of hegemonic economies (such as China), the possible introduction of a new form of currency to provide a safe and stable mean of payment to citizens of the euro area has had the power to create a growing interest towards such ambitious solutions. As a result, in the very near future we could experience a different way in which money works. We refer to the uncharted world of central bank digital currencies (CBDC). While projects for the creation of central bank digital currencies are booming all around the world, such interest is driven by various reasons that will be analysed in this paper, including the need to react to private initiatives for the creation of cryptocurrencies and stablecoins and, an increasing demand for fast and interconnected digital financial instruments and products. In the euro area, even if the debate for the creation of a Digital Euro has recently started, the ECB has proven to be already engaged in investigations, public consultations, and discussions with focus groups with the aim to provide European citizens, firms, and intermediaries with a “public” payment instrument suitable for a new digital era. In this framework, the role of a Eurosystem central bank digital currency will be analysed from a legal perspective. First, apart from the abovementioned reasons leading to the creation of a CBDC, it will be crucial to examine the structure and design of the Digital Euro, together with its objectives and the needs of its users. Consequently, while investigating on the legal framework which will permit the introduction of this digital currency, through a light review of similar models adopted (or in adoption) by other countries, we will seek to assess whether legal issues might hinder the realisation of this project or its actual implementation, especially concerning the impact on monetary policy, the international role of the euro and the banking sector. [less ▲]