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"The ECB should encourage public-private cooperation in the design of the digital euro"

The debate on the desirability of a digital euro, issued by the European Central Bank, has been growing in recent weeks. Today, at a seminar organised by the European Banking Federation, Pablo Urbiola, from BBVA's Digital Regulation team, said that "the ECB should rely on public-private cooperation, leveraging the strengths of all players."


Thus, the ECB could develop a robust and flexible infrastructure and the basic (cash-like) payment functionality of the digital euro, while banks and other regulated payment providers would develop advanced and value-added features. For this public-private cooperation to be a success, "it is essential that the general framework designed by the ECB is flexible enough, and that allows private players to develop business models in a competitive space."

In this regard, he said that Spanish banks are prepared for the eventual arrival of the digital euro. In fact, BBVA, together with the other 15 main Spanish banks, has participated in the first trials ahead of the possible issuance of the ECB's digital currency.

Pablo Urbiola participated in a seminar on the digital euro organized by the EBF (European Banking Federation), where different experts gave their opinion on the issue of a digital currency in Europe. At this forum, he noted that the challenges to which the ECB intends to respond with this initiative are very different from each other, as are the functionalities that a digital euro would require to be effective in each scenario.

“For instance, if a digital euro aims to respond to the decreasing use of cash, it should be designed as an electronic version of cash - that is, simple,  easy to use, with basic functionality.” But if a digital euro aims to respond to the threat of foreign digital currencies, "it should be able to replicate (and ideally overcome) some of the more advanced functionalities of these initiatives," he explained.

Is a digital euro necessary?

“Although it is hard to argue that a digital euro is needed at the moment, there are good reasons for the ECB to explore the possible issuance of a digital currency, and to be ready to make such a move should the need arise in the future,” commented the member of BBVA's digital regulation team.

Nevertheless, he believes it to be “essential that the ECB continues to follow a cautious and pragmatic approach: monitoring the evolution of the market and the materialization of the scenarios it has identified.”

While it is true that the pandemic has accelerated the decline in the use of cash as a means of payment, it is far from being eliminated. “Should that happen in the future, a digital euro could, in theory, help to preserve access to and use of central bank money.” In this sense, during a financial crisis it is to be expected that the demand for digital money from the Central Bank may increase. But “it is precisely in those circumstances when we want to avoid that a digital euro aggravates possible bank runs.

Moreover, banks are reacting to increased customer demand for digitized products. “Considering all the innovation that is taking place in the payments market, it is not clear which customer demands a digital euro could fulfil that may not be fulfilled by other initiatives,” stated Pablo Urbiola. Therefore, the Central Bank should consider “the opportunities and risks of a digital euro, and of the different design options,” he said.