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Progress in Eurosystem work on the digital euro

"It is enough to think that less than two years ago the working group in the Eurosystem had not yet been created to get an idea of ​​the speed and acceleration of the work of the digital Euro"

The governor of the Bank of Spain has made a very complete presentation -and in Spanish- of the work carried out by the Eurosystem on the digital euro. Just think that less than two years ago the working group in the Eurosystem had not yet been established to get an idea of ​​the speed and acceleration of the work of the digital Euro and of practically all the most important fiat currencies in the world.

Now it seems normal to us that no one doubts that the citizens of the eurozone will have a digital Euro, although it is not yet clear how long it will take to produce. But it is only about three years ago, in the spring of 2018, when this blog was born in FIDE, the vast majority of central bank governors ignored or despised the idea of ​​issuing public and secure digital money. This can be seen very well in the graph that the BIS publishes periodically on the treatment of CBDCs in the speeches of central governors around the world.

The progress of these two years has been spectacular but it is not going to stop. The Governor's presentation, as I have said, is the most complete and explanatory of what has been done so far but in two years we will see how progress will have been made in many fields in which reflection on them has only just begun.

I will only refer to a matter that is discussed, logically, with great caution: the changes that will have to be made in the current regulation of bank deposits to adapt them to a situation of liberalization and competition in payment systems. The authorities have made a very deep assessment of the advantages and disadvantages of the two new digital currencies: public digital money accessible to all citizens and Stablecoins. They are the two digital currencies most likely to be used in the future. But it will be inevitable to ask what changes need to be made in the regulation of bank deposits, the old digital currency. Because what is coming is a liberalization of a regulated sector (money and payment services) driven by the possibilities of using new technologies.

An analysis and assessment of the advantages and disadvantages of the current system of bank deposits is absolutely essential because it is the third digital currency in play. It is the most important because it is the only one that all citizens and companies can use. All your payments must go through bank deposits. Now only banks and governments have access to digital public money.

We know that, in unregulated sectors, such as photography or travel agencies, it is enough to let new competitors act (those of digital photography, Booking, Trip Advisor, Google Maps ...) to be produce an incorporation of new technologies within a framework of competition. But in regulated sectors, as happened with telecommunications or transportation, it was necessary to change the regulation of the companies that enjoyed the regulated monopoly in order to allow competition and innovation. AND the techniques of deregulation are well known: separation of activities, interoperability, suppression of privileges and interventionist regulations, etc. Ultimately, it is about making a correct reassignment of the roles of the State and the private sector that were thought for a system of regulated monopoly to another that should be based on competition.

Finally, I have underlined the "Spanish" aspect because, as long as the design work of the digital Euro is carried out by experts, English will continue to be the normal language in which most of the documents are published. But at some point reforms of the monetary system will have to go through parliaments and it would be very positive if the voters are aware of this matter because it will undoubtedly be one of the most important economic reforms of this century.

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Progress in Eurosystem work on the digital euro

About the Author

Miguel A. Fernandez Ordonez

Miguel A. Fernandez Ordonez

State economist. Former Governor of the Bank of Spain and member of the Governing Council of the European Central Bank (ECB). He currently teaches Seminars on Monetary Policy and Financial Regulation at IEUniversity.


  1. Hello,

    I have finished reading your book Adiós a la Banca and I found it very interesting. But I have a question, I don't know if I could clarify it here.

    If all money deposits are made in the Central Bank, how would the banking system insure its operations, with what money would it operate? Would they be like investment funds but with the possibility of leveraging x times? But warning your clients and investors that it is not safe money?

    Thanks in advance

    1. As you already have my book "Farewell to Banks" you can see the answer to your question in the section entitled WILL THE BANKS DISAPPEAR WITH THE REFORM? on page 215.

      The idea is that banks will have to transform themselves to provide the two activities that they now provide (payment services on the one hand and, on the other, loans to families and medium and small companies) in competition with other companies and without the aid and protections of the State they have now.

      For those who do not have the book I copy the last paragraph of that section:

      “Banks will need to transform and become specialized providers of these services without being able to use customer funds in the way they do now. They will have to become true intermediaries. But this could only be done if banks are given time to adapt to the rules of the market and competition. Facilitating a smooth transition for the banks would not only be beneficial for their managers and workers, but also beneficial for all citizens, because the services they currently provide are very important and there would be no abrupt changes in their provision. "

      1. Thank you very much for the reply.
        Yes, I just read the book and with great interest. His point of view is very interesting and I believe that a reform in this way would avoid the global financial crises as we have experienced.

        But my question was aimed at understanding what happens with that "other money" that banks create. If the Central Bank insures the deposits as they are in their accounts, how do private banks generate credit?
        If it is done "as before", in the nineteenth century, that is, based on its capital, these credits will be backed only by that capital. But, if there is a failure, if the bank fails, how to distinguish the money generated by those banks from real money? In the XNUMXth century this was easy because banknotes were private. But today, once private bank money enters the system, how is it distinguished from the "real money" in deposits? How do I know that someone pays me with money from a private bank loan or one deposited in the Central Bank?

        It's what I can't see clearly.

        Thank you very much for your attention.

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