European Economic Perspectives: Breakthrough for the digital euro

Research evidence excerpt

European Economic Perspectives: Breakthrough for the digital euro

retail CBDC

purposes, i.e. payments in physical stores, e-commerce, person-to-person payments, as and complement cash, not replace

well as payments among individuals and governments. As such, the digital euro would cash

be a retail CBDC, not a wholesale CBDC (which would facilitate much larger financial

flows, including those of corporates and financial institutions). The digital euro would

complement cash, not replace it - cash would remain in circulation alongside a CBDC.

The digital euro's legal tender status would be enshrined in European law, hence

merchants in the Eurozone would generally have to accept it. The purpose of the digital

euro would not be to support personal savings and investments.

2. Digital euro to be supplied via two-tiered structure (ECB & commercial banks)

The digital euro would be distributed through a two-tier model, with a clear division of Digital euro would be offered in a

responsibilities between the ECB/Eurosystem and commercial banks (or payment service two-tier model: The ECB would

providers, PSPs). The ECB would retain full control over issuance (i.e. the money supply) control issuance and settlement,

and settlement of transactions, while intermediaries would handle all customer-facing while commercial banks would deal

activities. These intermediaries would distribute the digital euro to end-users and with all customer-facing tasks

provide services such as account or wallet provision, onboarding and offboarding,

compliance with KYC and AML requirements, and the interfaces and devices needed to

make payments. Under this model, euro area residents would not be able to hold

accounts directly with the ECB. Access to the digital euro would be provided primarily