Central Bank Digital Currency and Cash in the Euro Area: Current Developments and one Specific Proposal

Gerhard Rösl and Franz Seitz

Credit and Capital Markets – Kredit und Kapital, 2022, vol. 55, issue 4, 523-551

Abstract: The present paper provides an overview on current developments of cash usage and issue of central bank digital currency (CBDC) in the euro area and proposes a possible design of a digital euro that allows for instant offline payments. Cash usage at the point-of-sale decreased perceptibly in the past years mainly due to the ongoing trend towards digitalization. However, we show that there are also indications that consumers were somewhat pushed into cashless payments by government regulations and supply-side restrictions by commercial banks. Nonetheless, overall demand for euro cash remained strong and even increased relative to GDP since the financial crisis in 2008. In this process, however, we observe a supply-driven shift towards lower banknote denominations. Central banks all over the world are intensively thinking about the potential issue of ­CBDC as a substitute or complement to cash. Based on some of its preferred characteristics, we propose a double pre-paid scheme combining central elements of TARGET Instant Payment Settlement and electronic money features enabling offline and online instant payments. Since anonymity is categorically discarded by the ECB and as cash has some special advantages from a consumer perspective, the digital euro will rather co-circulate with cash than replace it in transactions.

Keywords: Cash; banknotes; money; CBDC (search for similar items in EconPapers)
JEL-codes: E41 E51 E58 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.3790/ccm.55.4.523 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dah:aeqccm:v55_y2022_i4_q4_p523-551

Ordering information: This journal article can be ordered from
https://www.duncker-humblot.de/zeitschriften/ccm

Access Statistics for this article

Credit and Capital Markets – Kredit und Kapital is currently edited by Hans-Peter Burghof, Hendrik Hakenes and Ulrike Neyer

More articles in Credit and Capital Markets – Kredit und Kapital from Duncker & Humblot, Berlin
Bibliographic data for series maintained by E-Publishing-Team ().