Two weeks ago, the European Central Bank released a paper outlining its views on retail central bank digital currencies. According to the paper dubbed “Innovation and its impact on the European retail payment landscape,” the EU says the innovation ensures safe and efficient payment infrastructures. This helps to promote public trust in fiat.

The paper also notes that innovation could help to meet the social demand for cross border payment systems that are cheaper, faster, and more user-friendly. It notes that stablecoins should be considered as a last result of this demand. According to the ECB, they need to be investigated intensively using globally standardized initiatives.

The ECB says it will continue to investigate how innovation is changing payments in the euro area, including reduced demand for physical cash. It also notes that it will continue to investigate how its policies can be adapted to meet the challenge of setting monetary policy and consumer protection.

Issuance of a CBDC

In the paper, the ECB says it will continue to look into the pros and cons of issuing a CBDC, which will ensure the eurozone citizens, continue to use money issued by the central bank. However, it insists that the central bank projects around this issue should not impede or compete with the private sector in its efforts to improve payments systems in the eurozone.

The ECB notes that in recent years, there have been efforts to create a pan-European payments system. However, while a lot of work has gone into the back end development of the system, it has not translated into successful front-end solutions. In the paper, the ECB says that it supports efforts to create a pan-European solution for online payments and point of sale.

Five Key Objectives: The ECB identifies five key objectives of such a system:

  • Eurozone-wide reach and seamless experience for users
  • Cost efficiency and convenience
  • Security and safety
  • European governance and identity
  • Global acceptance

In the ECB’s opinion, new solutions should be focused on instant payments while also being open and compliant with the block’s competition rules.

Issuance of Retail Stablecoins

The ECB acknowledges that global stablecoins could help to address the shortcomings facing cross-border retail payments as well as financial inclusion. However, the ECB notes that this area is untested on a wide scale. This is especially so when it comes to regulatory and legal risks.


According to the ECB, if the creation of a pan-European payment system fails, the needs it seeks to address could be sorted out using a CBDC. This would allow all users in the Eurozone to access cheap and easy payment solutions.

It also notes that if there is a future decline in the use of cash, the ECB could accelerate its efforts to issue a retail CBDC. However, it notes that issuing a CBDC could change how monetary policy is conducted. Besides that, it could affect the intermediation role that commercial banks play. As a result, the ECB says it will continue to investigate a CBDC and the potential benefits it could offer Eurozone citizens.

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