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- Title
Central Bank Digital Currency and Cash in the Euro Area: Current Developments and one Specific Proposal.
- Authors
Rösl, Gerhard; Seitz, Franz
- Abstract
The present paper provides an overview on current developments of cash usage and issue of central bank digital currency (CBDC) in the euro area and proposes a possible design of a digital euro that allows for instant offline payments. Cash usage at the point-of- sale decreased perceptibly in the past years mainly due to the ongoing trend towards digitalization. However, we show that there are also indications that consumers were somewhat pushed into cashless payments by government regulations and supply-side restrictions by commercial banks. Nonetheless, overall demand for euro cash remained strong and even increased relative to GDP since the financial crisis in 2008. In this process, however, we observe a supply-driven shift towards lower banknote denominations. Central banks all over the world are intensively thinking about the potential issue of CBDC as a substitute or complement to cash. Based on some of its preferred characteristics, we propose a double pre-paid scheme combining central elements of TARGET Instant Payment Settlement and electronic money features enabling offline and online instant payments. Since anonymity is categorically discarded by the ECB and as cash has some special advantages from a consumer perspective, the digital euro will rather co-circulate with cash than replace it in transactions.
- Subjects
EUROPEAN Central Bank; ONLINE banking; CENTRAL banking industry; ELECTRONIC funds transfers; BANKING industry; GLOBAL Financial Crisis, 2008-2009; ELECTRONIC money; EUROZONE; BANK notes; CASH transactions
- Publication
Credit & Capital Markets / Kredit und Kapital, 2022, Vol 55, Issue 4, p523
- ISSN
2199-1227
- Publication type
Article
- DOI
10.3790/ccm.55.4.523