The digital euro should be an attractive means of payment but its design should prevent it from becoming so successful as a store of value that it threatens banks and private money, according to Fabio Panetta, a high-ranking executive at the European Central Bank. Panetta stressed that both this paradox as well as the need to issue a successful CBDC need attention.
Europe’s Digital Currency to Complement Cash and Be Monterey Anchor
While cash currently provides people with access to central bank digital money, its importance in payments is declining as consumers increasingly prefer to pay digitally and shop online. Internet sales in the euro area have doubled since 2015 and only around 20% of the cash stock is now used for payments, compared to 35% a decade and half ago, Fabio Panetta, member of the Executive Board of the European Central Bank noted in a speech at the Elcano Royal Institute in Madrid.
“As people start to use cash more as a store of value rather than a means of payment, having a digital euro would enable them to continue using central bank money as a means of exchange in the digital era,” Panetta said during his address, focusing on the future role of central bank digital currencies (CBDCs). In his view, a digital euro and cash would complement each other to ensure that central bank money remains a monetary anchor for the payments ecosystem.
To achieve that, the digital form of the euro should be attractive for regular use in payments, the ECB official believes. At the same time, its design should prevent it from becoming “so successful as a store of value that it crowds out private money and increases the risk of bank runs.” In his comments, Fabio
