Digital currencies issued by central banks
Central bank} digital currencies (CBDCs), expected to become a reality in the next decade, could, in geopolitical terms, be a real game changer, bypassing the reigning dollar and euro payment systems and raising possibilities – but also dangers.
This is what Maria Demertzis, a senior fellow at Bruegel, stressed on Tuesday while speaking on the “Central Bank Digital Currencies: The Value Added and the Euro Case” panel at the 34th annual Greek Economic Summit GES2023 – “Fostering a Sustainable Economic Future amidst Global Challenges.”
The event was organized by the American-Hellenic Chamber of Commerce in cooperation with the Athens Exchange Group, and in strategic partnership with the Atlantic Council and the US Chamber of Commerce.
“Central bank digital currencies will happen. It is not a conversation whether this will happen. They are expected to happen in the next decade. There are already 11 countries in the world with their central bank digital currencies in operation,” she said.
“The CBDCs are going to be public money that will be the digital equivalent of cash. The digital euro will be public money while the euro used digitally is private money. There is an important difference between the public and the private nature of the two and that is that the public money, namely the cash that we have in our pockets, is fully guaranteed by the state. Though the banknotes that we hold in our hands are a contract between those that hold the cash and the public authorities and their value is fully guaranteed, the euros used digitally are only partially guaranteed,” Demertzis clarified at the event.
“The motive is different from country to country. Central banks were pretty motivated by the emergence of cryptocurrencies. There was a fear that this type of money was going to dominate. So they wanted to create an equivalent to compete directly with it. There are also two more motives: money’s efficiency and inclusion. There are countries in the world that have created digital currencies vying for inclusion. There are a lot of people that do not have access to financial systems. CBDCs provide a solution to them. This is not relevant in the euro area. Inclusion is not an issue,” she explained.
Therefore, she added, creating a CBDC for retail purposes in the euro area offers little obvious value added, at least for the foreseeable future.
