Are You Prepared for the Virtual Euro?

ByKlaus Hueber

May 25, 2021

Financial players expect ECB (European Central Bank) to announce its move to introduce a digital euro, EBDC (Central Bank Digital Currency). ECB president Christine Lagard said that the project could take almost four years.

So, are you ready for the crypto euro? Or, what is the virtual coin all about? Although resembling your bank account, the digital euro is similar to virtual currency. Your bank account balance is a commercial currency and cannot act as a legal tender. Do you know what that means? Well, that means a company can decline your bank’s payments, but accept the transactions from a different bank.

The best thing about a digital euro is that it has a legal tender status. That means you can use the virtual euro to pay for your groceries and coffee. Although chances a shop will decline your payments are implausible, no one knows what holds the future of the financial market.

Keep in mind that cryptocurrencies are gaining popularity, used as a payment option to improve even international trade. From the current trend, more cryptocurrencies will likely gain acceptance, serving as the real currency.

However, there’s no guarantee that all digital coins will achieve mainstream, thus the digital euro relevance. More cryptocurrency in the market will threaten ECB’s monetary transmission. The transmissions enable ECB to achieve price stability. Moreover, the euro disappearing from the Eurozone will render ECB monetary policy useless.

Introducing a virtual euro will prevent the occurrence of such cases. Europe Central Bank uses various strategies to control the digital euro. For instance, it will not be based on Blockchain but rather ECB’s ledger. With that, the digital euro will differ from cryptocurrency.

Although with a simple underlying theory, you may find digital euro design a bit complex. The virtual euro comes in two categories: general-purpose and wholesale. Any consumer can access the general-purpose virtual euro while only institutions can enjoy the wholesale one. Introducing a wholesale virtual coin is easy. However, not the main ECB’s primary goal.

ECB plans to introduce a digital euro that vulnerable groups can use. Moreover, the virtual coin should be free for you to complete offline transactions.

As of now, we will remain vigilant to see how ECB will accomplish its digital euro objectives.

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