The latest report from the European Central Bank predicts that the digital euro will replace some of the bills in circulation, fundamentally reshaping how Europeans spend their money. Bank deposits are also affected.
Digital Euro reforms how Europeans use banknotes and bank deposits
The Digital Euro, a project aimed at implementing the European Central Bank’s digital currency (CBDC), has not yet been approved, but the European Central Bank (ECB) has already studied the impact on the current composition of assets, including eurozone banknotes and bank deposits.
The latest report from the bank shows that the upcoming issue of the digital euro can reconstruct how Europeans spend their money.
Banks estimate that the digital euro could replace five for every 10 euros issued on physical banknotes from the circulation. Similarly, the same study predicts that for every 10 digital euros issued, three will be removed from bank deposits.
The total impact of the digital euro was studied in three different cases, depending on the recruitment and acceptance of citizens. If adoption remains low, the banknotes will be replaced by 15 billion euros. If the reception reaches the highest level, 125.5 billion euro bills will be taken from the market.
Finally, if adoption reaches the highest level, banks predict that the digital euro will replace 256 billion euros in banknotes.
Nevertheless, even the best reception forecasts still offer a small amount of digital euros, as more than 1.56 trillion euros are issued on banknotes.
Unlike the US, which recently opposed the issuance of the dollar CBDC, Europe has been promoting the issuance of digital euros to counter the relevance of dollar stubcoins and other cryptocurrencies.
In January, ECB board member Pierocipolon said the digital euro would serve as a halt to the rise of these bankless solutions. “That’s why we need the digital euro,” he emphasized.
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