What is the digital euro, how does it affect us, and why is the ECB in such a hurry to implement it?

The digital euro is relatively unknown, but the European Central Bank (ECB) has been working for some time to make it the next revolution in European currency. The body chaired by Christine Lagarde has been dropping hints about what it will be and how it will be implemented, but beyond the theoretical approach, the technical part is still in its infancy. However, little by little, there is more and more talk about the digital euro, also beyond the ECB. But what is the digital euro and how will it affect society?

The governor of the Bank of Spain, José Luis Escrivá, defended it this week, at the 5th Observatory of Finance, organized byThe Spanish, the implementation of the European digital euro or CBDC (Central Bank Digital Currency). "We are in a world that calls for deepening our strategic autonomy and strengthening the elements that identify our European sovereignty. And what is more important to Europe's identity than its currency, the euro?" he asked.

"There are strange creatures in today's world," he said, referring to cryptocurrencies, which "are endangering the monopoly of states' currency," he asserted. And in reference to the US, he added: "There is one that has to do with the currency ceasing to be public and moving towards a model of private currencies, which, furthermore, is dominated by currencies issued from across the Atlantic," he added. "If anything has given societies security, it is knowing that behind the currency there is a central bank that provides confidence, security, and credibility," he concluded. In fact, this is the key to the digital euro and the ECB's willingness to implement it immediately.

"The next revolution"

At its core, the digital euro itself already exists: it's the numbers that appear in our checking accounts and, in essence, is the promise of a private entity, a bank, that says they're valid. "There's social pressure to move away from physical money, but this is where the paradigm arises: who should issue digital money? In response, the ECB has said that they will be the ones to issue it, just as they do with physical money," explains Alex Saiz, co-founder and CEO of the fintech MONEI, which is participating with the ECB in the development of this digital euro.

"It is understood that it is more robust for digital money to have the support of the ECB than of a private bank," argues Saiz, but adds that "depending on how its implementation is managed, the traditional financial system could be jeopardized." However, he assures: "Since the Industrial Revolution, this is the next big change: moving to using digital money supported by the ECB will entail a radical transformation of the financial sector." Along the same lines, Xavier Brun, a professor at UPF-BSM, assures that the main question is how it is structured. If the ECB is behind the digital euro, "we have a problem, because people will trust the ECB more (money is fearful) than in traditional banks, and they may have a very serious liquidity problem," warns Brun.

Likewise, "if the digital euro is in the hands of the ECB, it will know the first and last names of everyone who has euros, and if there is investment with Ukraine or Russia, for example; they could even block your accounts," says Brun. "Now all this information is held by private banks, and judicial authorization is needed to provide it," says the professor, "and all this could lead people to end up taking their money abroad to avoid being even more controlled than we are." However, according to Anton Gasol, former dean of the College of Economists of Catalonia, "it won't be a huge transfer; it's a financial adaptation." "The idea is for physical and digital money to coexist; it won't be all at once," he explains.

Why the rush?

Why does the ECB want to issue digital currency? "There is social pressure to displace cash, and there is also great geopolitical pressure to go in that direction; in fact, they have already done so in China," explains Saiz. Europe's sudden rush comes from this: "We have to act quickly, because it could happen that the US throws the stablecoins (US digital currency that Trump has decided should be issued by private companies) and they start to be used here, or that China's digital yuan arrives here, and Europe wants to preserve the euro," says the founder of MONEI.

The deployment "will be a very smooth process; some will be created wallets (digital wallets) that we will have on our phones with a very small amount of digital euros to boost the process," explains Alex Saiz. "Surely the ones who will distribute the digital euros will be the financial institutions, which are the ones with the power to do so," he adds.

And what advantages could it have? "If governments know that everyone has an app with a unique identifier using the Clave system, and tomorrow there's another DANA, for example, in less than 24 hours wallet of society, which would allow direct injections into SMEs in Valencia without having to go through banks - explains Saiz as an example -. When the government receives an ICO grant, from the moment it receives the funds until it places them in the financial institutions, which are responsible for making the transfers, many months can pass; it is a very complex process, and with a wallet It would be much faster," he says.

However, the timetable is still unclear and, although as Escrivá explained, the digital euro is already in the "preparation phase, prior to implementation," there are still important details to be defined. For now, however, we can start preparing: "The politicians will prepare us."