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Today (October 2nd, 2020), ECB published a press release regarding "digital euro". What is it? When you pay with the credit card or make a bank transfer to another account aren't you using a digital euro? It certainly isn't cash, so it must be digital, right?

Quote from press release

A digital euro would be an electronic form of central bank money accessible to all citizens and firms – like banknotes, but in a digital form – to make their daily payments in a fast, easy and secure way. It would complement cash, not replace it. The Eurosystem will continue to issue cash in any case.

“The euro belongs to Europeans and our mission is to be its guardian,” said Christine Lagarde, ECB President. “Europeans are increasingly turning to digital in the ways they spend, save and invest. Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”

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  • From the link "Hub: A digital euro" at the bottom of the page you link, it appears (a) the details are still under discussion, but (b) it sounds like it's going to be a crypto-currency-like "thing" (they want it to work "when traditional payment services may no longer function") but ESB-backed, so without the volatility of the current crypto offerings. However, I'm only going from that page: I'd not heard of it before this question.
    – TripeHound
    Oct 3 '20 at 12:46
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When the ECB provides loans and bailouts to private banks it does not transfer physical money to the private banks’ vaults. Instead, the ECB creates digital account balances into the accounts that private banks have at the ECB. There is literally ZERO physical cash money involved at any point during these transactions.

This means that a digital euro already exists – and has been existing and is being used for at least 2 decades. In fact, there are more digital euros in circulation worldwide than there are actual physical euros in circulation.

Today, when consumers and companies make payments using bank cards and online payment processors, most of that money that is being transferred is therefore digital money, digital euros, because the actual money supply largely comes from the digital money that the ECB provides to private banks (loans, bailouts,…).

Also, private banks do not hold all the cash money that their clients deposit, in savings accounts for example. This system is called fractional reserve banking. Most of the deposited cash money is used by private banks to finance their investments on financial markets.

The small remaining fraction of cash money that private banks do actually hold is used as collateral for loans that people and companies get from private banks, when you want to buy a car or when you want to expand your business, for instance. Obviously, the full amount that someone or a company borrows from a private bank is not available in cash money. The amount that is not secured by that fraction of cash money is created out of thin air by private banks. This remaining amount is digital money, digital euros. It does not really exist in tangible money.

Effectively, a “digital euro” already exists and is the dominant “euro” in the economies of the EU member states. There is no need to create a new “digital euro”, it’s already there for more than 20 years.

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