FRANKFURT (Reuters) – Creating a digital euro could boost the single currency’s international status by making it easier to use for paying or saving, the European Central Bank said on Wednesday.
The European Commission has made it a goal to boost the euro’s use outside the euro area, which has stagnated for years and declined slightly in 2020 as a result of the coronavirus pandemic.
The ECB said a digital euro could increase the euro’s appeal, though the health and size of the euro zone’s economy were more important.
“Safety, low transaction costs and bundling effects, could ease international adoption of a currency,” the ECB said.
Opening a digital euro to foreigners would also come with risks, however, such as opening a gateway for money laundering or facilitating runs on weaker currencies at times of crisis.
The ECB said these could be addressed in the design of the digital currency, for example by setting a cap on how much each citizen can own or forcing disclosure.
“Transparency or selective privacy would enable better compliance and know-your-customer checks to be implemented, thereby controlling illicit payment flows, for instance for large transactions,” the ECB said.
“These safeguards would strengthen the reputation and credibility of the digital euro.”
The euro accounted for just under 22% of all global foreign exchange reserves last year, a distant second to the U.S. dollar’s 59% share.
The ECB hasn’t officially decided whether or not it would introduce a digital euro and no launch is expected to take place before four or five years.
(Reporting by Francesco Canepa; Editing by Chizu Nomiyama)
