European Central Bank will launch a public consultation and start experiments to help it decide whether to create a “digital euro” for the 19-nation currency club. The move comes as the pandemic accelerates a shift away from cash, and as policymakers nervously eye the rise of private cryptocurrencies like Bitcoin. A digital, or virtual, euro would be an electronic version of euro notes and coins, it would be legal tender and guaranteed by the European Central Bank. It would also for the first time allow individuals to have deposits directly with the ECB. This could be safer than with commercial banks, which could go bust, or than holding cash that could be stolen or lost. Like cash, money could be stored outside of the banking system, such as in a “digital wallet”.
Covid-19 pandemic has boosted electronic payments as customers avoid notes and coins over fears, they might spread the coronavirus. Even in Germany, where cash is said to be king, consumers are this year expected to spend more money by card than in cash for the first time. If people in the eurozone were to switch en masse to virtual currencies that operate outside the ECB’s reach it could hamper the effectiveness of its monetary policy measures. Privately-issued digital currencies are extremely volatile. The price of Bitcoin has nearly halved since its late-2017 high of around $20,000 (17,030 euros). In recent years, central banks have begun looking into offering their own virtual money — known as Central Bank Digital Currency (CBDC) — as a stable and risk-free alternative. The Chinese central bank started trials with digital currency in four cities in April, and the Bank of France has started experiments.