Central banks around the world are exploring issuing central bank digital currencies (CBDCs) in response to increased digitalization, new private payment providers, and vulnerabilities. The document discusses three key issues for CBDCs: ensuring central bank money anchors the monetary system, open and competitive payment systems, and choice between public and private money. It then summarizes the European Central Bank's digital euro project which aims to complement cash and private payments, allow digital payments across Europe with cash-like features, and enable pan-European financial innovation.

1. Digital central bank money: Ideas, initiatives and issues
Martin Summer
Oesterreichische Nationalbank
DSE - Cryptica, Belgrade, November 2023

2. Central Bank Digital Currencies
Digital pound
Digital yuan
Digital dollar
Digital euro
Digital real
Central banks around the globe are exploring central bank digital currency issuance.

3. The broader context these initiatives
• Massive entry of new private issuers of payment instruments into the
payments domain.
• A general increase in digitalisation of the economy and a decline in the use of
cash.
• A heightened awareness of the vulnerability of critical infrastructures in a world
of increased geopolitical tensions.

4. The current monetary system: A public private partnership

5. Issue 1: Assuring that the monetary system is anchored by central bank
money
• Perhaps the most signicant recent development in new privately issued means of
payments has been the entry of big techs into nancial services.
• The network eects that underpin the business of big techs are a potential threat
to the anchoring of the monetary system by central bank money.
• If central banks fail to strategically react to these developments they might in the
long run end up loosing control over monetary policy.

6. Issue 2: Assuring the payment system is open and competitive
• The network eects that underpin big techs are also a mixed blessing for users
because they foster concentration in the market for payments.
• Entrenchment of market power may exacerbate the stubbornly high costs of digital
payment services, one of the biggest shortcoming of existing solutions.

7. Issue 2: Assuring the payment system is open and competitive
Source: Bank for International Settlements, Annual report 2021

8. Issue 3: Assuring freedom of choice between paying in public or private
money
• Left: Competition between department stores as analogy for competition between
platforms: Walled gardens.
• Right: An open market place as the vision of the role of CBDC in the payment
system at large.

9. The ECB's digital euro project
• The European central bank is currently working jointly with the European
legislators on the design of a future digital euro.
• Past milestones in this project:
• October 2020: Report on the digital Euro
• October 2021 - October 2023: Investigation phase, Concept denition, technical
exploration and design proposal
• Next steps in the project:
• November 2023 - November 2025: Prepare to develop: search for possible providers
and support the legislative process.
• From November 2025: Development and roll out.
• In parallel the European legislator has started a process for negotiating a legal
framework for the digital Euro based on a proposal released by the European
commission in June 28th 2023.

10. High level design features

11. A digital euro to serve an increasingly digitalised European society
• Available in several payment scenarios
• Person to person payments
• Payments in physical and online stores
• Payments to and from the government
• Widley accessible and accepted In line with the legislative
proposal presented by the European Commission:
• All euro area banks will oer digital euro to customers who ask
for it
• All euro area merchants accepting digital payments will also
have to accept digital euro
• Leaves no one behind
• Digital inclusion, supported via legislative proposal and ECB
measures

12. Combining the advantages of cash with the benets of digital payments
• Distinctive features welcomed by consumers and
merchants alike
• Like cash, digital euro would be accepted everywhere in the
euro area
• Online and oine functionalities
• High level of privacy by default
• Conditional payments, but NOT programmable money
• Easy porting of digital euro holdings, including for emergency
situations
• Comfortable payment experience
• Smooth onboarding and simple access for end - users via (i)
existing online banking apps or (ii) new digital euro app
• Payments via mobile phone and/or physical card.
• Contactless payments via QR codes and alias
• Usability with holding limits and linked account, without
remuneration

13. Dierent use cases through a wide range of devices and technologies

14. Privacy also as money becomes more digital

15. Supervised intermediaries play a key role as distributors of the digital euro
• Intermediaries at the front line
• Intermediaries, including banks, will distribute the digital euro,
managing customer relationships, digital euro payments and
related services
• Digital euro would oer a platform for innovation, enabling
intermediaries to achieve pan Euro area reach and expand use
cases based on the Euro area's monetary anchor
• The Eurosystem will issue the digital euro and settle payments
• The Eurosystem will develop a digital euro scheme to ensure a
digital euro can be equally used throughout the euro area

16. A digital euro would be free for citizens
• Adequate compensation principles
• A digital euro would be free for basic use by citizens
• Merchants would not pay more than for comparable payment
services , provided adequate legal safeguards are established
• Eurosystem bears its own costs , as for production and issuance
of banknotes
• Payment service providers would obtain comparable
compensation as for comparable payment services , without
facing scheme or settlement costs

17. Key take aways
In the context of digitalisation There are three key strategic motives for central
banks to think about and work on CBDC concepts
• Assuring that the monetary system is anchored by central bank money
• Assuring that the payment system is open and competitive
• Assuring freedom of choice between paying in public or private money

18. Key take aways
The digital Euro is a CBDC model envisioned by the ECB and the EU. It's main
design ideas are:
• A complement to cash in the digital age and a complement to private means of
payment
• A payment option allowing everyone to pay digitally everywhere in the euro area
• Brings valued features of cash to the digital sphere (e.g., oine-functionality,
privacy, acceptance and availability)
• A European platform for innovation, allowing intermediaries to build services
for their customers that are instantly available across Europe
• Increasing resilience and economic eciency of European payments and
contributing to (open) strategic autonomy