DIGITAL EURO: answers to the main questions

What is it?
The digital euro is a new dematerialized currency and, as such, is an electronic means of payment accessible to everyone for free.

It is a CBDC, an acronym for “Central Bank Digital Currency,” which means: digital currency issued by a central bank (in our case, the ECB and the national central banks of the European Union member states: for us, the Bank of Italy).

So, while the digital euro is an electronic and immaterial currency, it is not a cryptocurrency like Bitcoin or Ethereum, because the power to issue it remains in the hands of the states and supranational organizations like the EU. Furthermore, cryptocurrencies are created freely, are not subject to any control by public authorities, are not guaranteed, and have volatile values that depend on their market exchange rates.

How does it work?
The digital euro will be managed and exchanged using blockchain technology, the same technology used for cryptocurrencies. To use the digital euro as a means of payment, it will be necessary to create a wallet (an electronic wallet), but without the need to open a bank or postal account, as the equivalent value will be deposited directly with the European Central Bank (ECB). A key aspect is that it will be possible to pay with the digital euro without any need for an intermediary, representing a significant advancement compared to the current situation, where all transactions (bank transfers, POS, credit cards, etc.) are mediated by intermediaries between banks and customers, with associated commission fees for the services provided (which will not be the case with the digital euro, allowing savings on commissions). In the coming years, the digital euro will be used alongside traditional physical currencies and banknotes, and as an alternative to them, because it will have legal tender guaranteed by the European Central Bank.

What is the purpose?
The purpose can be summarized in a few points. The digital euro:

1. Is a pan-European payment solution that would reduce Europe’s dependence on non-European private payment service providers and make the European payment landscape more competitive and innovative;
2. Is fast, easily accessible, constantly traceable, risk-free, and free for basic functions;
3. Keeps pace with global technological and sustainable advancements.

What will be the benefit for merchants?
It will offer an easier and cheaper alternative in the fragmented payment landscape in which merchants currently operate. A digital euro will give merchants greater bargaining power in negotiating service conditions with payment solution providers, thus reducing their costs. These reductions could then be passed on to customers. Thanks to the digital euro, merchants will benefit from higher conversion rates. This aspect is particularly important for online purchases, as customers are less likely to abandon a purchase if they are familiar with the payment method. Moreover, a digital euro would allow merchants to receive payments instantly without additional costs.

Replacement or coexistence?
It is crucial to note that the digital euro would complement, not replace, cash, which would continue to be available (both online and offline) in the euro area alongside other private electronic payment methods. In summary, the implementation of the “digital euro” project allows the use of central bank money in digital payments, providing European citizens with an accessible tool across the euro area to make everyday payments while supporting the goals of European society. A digital currency issued by the central bank and available to all would provide an anchor of stability for the payments market, preserving the coexistence of public and private money from which we have benefited so far. In short, the advent of the digital euro is of imminent importance to validate our economic power and, above all, to keep pace with a constantly evolving world.