European Parliament Article Influences Digital Euro

A European Parliament study warns against introducing a CBDC until “new elements” arise since the risks outweigh the advantages.

Before launching a digital euro in 2026, the European Central Bank has been exploring solutions.

The European Parliament’s Committee on Economic and Monetary Affairs has requested the Economic Governance and EMU Scrutiny Unit’s assessment.

In a paper, titled Digital Euro: When in doubt, abstain (but be prepared), the unit says that the ECB should continue to explore the CBDC , including carrying out a testing phase.

The study advises the ECB to in the end not launch a PDE [potential digital euro] unless new elements emerge strongly supporting such a decision. At present, this enterprise’s dangers and unknowables outweigh its benefits.

The unit argues that establishing a digital euro would place the ECB in competition with banks and other payment service providers.

“It is not clear that there is a market niche for a PDE, nor that a PDE would have a good chance of establishing itself in today’s highly diversified, competitive, innovative, and fast moving retail payment industry.”

A digital euro must strike the goldilocks balance between success and failure to avoid hurting commercial banks. The study claims that a digital euro would speed up a bank run during a crisis by providing a risk-free alternative to bank deposits.

Finally, a digital euro may not improve financial inclusion in the eurozone, but it could reduce the high costs and delays of cross-border worker remittances.