An analytical paper published by the European Parliament's Committee on Economic and Monetary Affairs has given the digital euro a mixed review. The title of the article summed up his position: โDigital Euro: if in doubt, abstain (but be prepared)โ.
The document was written at the request of economist Ignazio Angeloni's parliamentary committee to assess preparations for the launch of a digital euro. Angeloni analyzed ten problems that a "prospective digital euro" (PDE) will face, concentrating on their drawbacks.
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Angeloni wrote that a digital euro would put the European Central Bank (ECB) in the position of competing with commercial banks for deposits, but collaborating with them, as commercial banks would provide frontend services to digital euro users under a model of brokerage:
โThis creates potentially adverse incentives and warrants a well-designed compensation structure for the services provided by banks. The ECB reports do not give information about this.
The introduction of a digital euro may have a disruptive effect that the ECB is not prepared for, Angeloni found. The digital currency would have to be attractive enough to find a customer base, but not so attractive that it would undermine the banking system. If the digital euro paid interest, it would have to be managed separately from cash interest rates, which could encourage arbitrage.
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Angeloni ended with a quote from US Federal Reserve Board Governor Christopher Waller that a central bank digital currency (CBDC) is "a solution in search of a problem." He recommended:
โThe ECB should continue its exploration and perhaps also launch the testing phase in October, but it shouldn't really launch a PDE unless new elements emerge in the future. [โฆ] In favor of such a step.โ
the ECB will decide in october whether to continue your CBDC research with a โrealization phaseโ.
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