The ECB must prepare to issue a digital euro to complement banknotes “if and when” it becomes necessary, ECB board member Fabio Panetta has said.
Major central banks are studying the creation of officially sanctioned digital currencies to address demand for electronic means of payment and fend off competition from Bitcoin and other crypto tokens.
In a study, the ECB said a digital euro could help in scenarios where citizens abandoned cash, foreign forms of electronic money took over, or other means of payments became unavailable.
“We should be ready to issue a digital euro if and when developments around us make it necessary,” Mr Panetta said. “This means that we already need to be preparing for it.”
The ECB gave itself until the middle of next year to decide whether to go forward with the project, which is now open for public consultation.
A main concern is that this form of money might displace traditional deposits, hollowing out commercial banks and crowding out private solutions.
Last month, Irish Central Bank governor Gabriel Makhlouf said that any introduction of a digital euro would be “a complement and not a substitute” for cash.
“Before you worry about all that cash you have under your mattress, there is no immediate impending switch to such a digital currency,” he said.
In an address to the economic think-tank the Institute of International and European Affairs, Mr Makhlouf said a switch to digital payments has a number of implications for monetary policy, particularly where it may lead to a dilution of a central bank’s control of the money supply.