The future of digital retail payments in Europe: A role for central bank issued crypto cash?

Abstract

In the broader context of the arrival of distributed ledger technology (DLT) and in light of payments and regulatory innovation in the European market, this paper investigates the changing role of money in retail payments and the associated question as to whether central bank fiat currency risks to fall behind. Against this background, the paper asks whether the introduction of a form of central bank crypto currency (CBCC) – a central bank money based crypto retail payment method as a complement to physical cash - would be useful and explores what this could look like. Such a new form of digital cash could be developed by building on DLT and cryptography, akin to the increasingly important space of private crypto currencies. In case of a central bank issued crypto cash equivalent, labelled ‘Euro-cryptocash’, key questions ranging from the involvement of banks and non-bank payment service providers, to privacy versus transparency, resiliency, efficiency and the role for consumer protection are discussed. As pressures on fiat currencies are increasing, the development of a form of ‘Euro-cryptocash’ is going to become an essential prerequisite for the future of the Eurosystem and the Eurozone.