The European Parliament’s Committee on Economic and Monetary Affairs commissioned economist Ignazio Angeloni to assess the viability of a digital euro. Angeloni’s report identified ten challenges that a prospective digital euro (PDE) would face and concluded that the introduction of a digital euro may create more problems than it solves. He argued that the European Central Bank (ECB) would be competing with commercial banks for deposits, but collaborating with them as they provide frontend services to digital euro users under an intermediated model. Additionally, the digital euro may have a disruptive effect that the ECB is unprepared for, as it would have to be attractive enough to find a customer base but not so attractive that it undermines the banking system.
If the digital euro paid interest, it would have to be managed separately from cash interest rates to avoid arbitrage operations. Angeloni recommended that the ECB continue its exploration and testing phase but should not launch a PDE unless new elements emerge in the future that favor such a step. The ECB is expected to make a decision on whether to proceed with the realization phase of CBDC research in October.
