An analytical paper released by the European Parliament Committee on Economic and Monetary Affairs has given the digital euro a mixed review. The title of the paper summed up its position: “Digital Euro: When in doubt, abstain (but be prepared).”

The paper was written at the request of the parliamentary committee by economist Ignazio Angeloni to assess the preparations for the launch of a digital euro. Angeloni looked at ten issues that a “prospective digital euro” (PDE) will face, concentrating on their downsides.

The introduction of a digital euro may have a disruptive effect that the ECB is unprepared for, Angeloni found. The digital currency would have to be attractive enough to find a customer base, but not so attractive that undermined the banking system. If the digital euro paid interest, it would have to be managed separately from cash interest rates, which could encourage arbitrage operations.

(by Derek Andersen)