Central Bank of Cyprus highlights benefits of digital euro

The Central Bank of Cyprus (CBC) presented the benefits of the planned digital euro at a press conference on Tuesday, while also providing details on the efforts being made behind the scenes to ensure its successful implementation.

Among the advantages highlighted were its wide acceptance across the EU, stringent security standards, user-friendly nature, and guarantee of user privacy.

The digital euro, the CBC explained, is not intended to replace cash and existing electronic payment options but to add another choice.

In his opening remarks, CBC governor Christodoulos Patsalides said that the Eurosystem is exploring the issuance of a digital euro, following the global trend among central banks.

He added that a strong euro supports EU autonomy for the benefit of consumers and businesses. He said that while the Eurosystem prepares for the euro’s future, citizens’ prosperity remains the primary goal.

Delivering a pre-recorded message, Piero Cipollone, a member of the executive board of the European Central Bank (ECB) and president of the high-level task force on the digital euro, outlined potential uses of the digital euro in the Cypriot economy.

“Cyprus attracts millions of tourists annually,” Cipollone said, noting that “tourism is a significant part of your economy, creating jobs and opportunities for all”.

“Payment transactions are a fundamental part of our lives, even when we are on vacation,” he added.

Cipollone highlighted the current dependence of non-European tourists on non-European payment methods for transactions with Cypriot hotels, restaurants, taxis, and other services, stressing the need for alternatives.

For this reason, he said, “the Eurosystem is working on the digital euro, which would provide consumers with an additional payment option complementing cash”.

The presentation of the digital euro was delivered by Stelios Georgakis, deputy senior director of the CBC’s banking operations department, who explained through specific examples why the digital euro represents a crucial pillar for genuinely European, innovative, seamless retail payments.

Georgakis clarified that the Eurosystem is conducting preparatory work to be able to issue the digital euro when and if deemed necessary, and only after the legislative package of the European Commission is finalised.

This package would both establish and regulate the digital euro, ensuring the physical form of euro banknotes and coins remains intact.

According to Georgakis, the digital euro would be the natural evolution of our currency in the digital age, combining the benefits of electronic payment methods with the unique characteristics of cash.

“We are exploring how our currency can become digital,” he said.

“The way people prefer to pay is changing, and it is important that our currency evolves accordingly,” he added, noting that a digital euro would complement, not replace, cash.

Moreover, he said that if issued, the digital euro would be a European initiative offering something unprecedented, meaning “a truly European digital payment medium accepted throughout the euro area, governed by a legal tender regime, providing the highest privacy protection and safeguarding users’ personal data”.

“Whatever happens, the euro will continue to be a reliable currency,” Georgakis stressed.

“Whether in digital or physical form, a euro will always be a euro,” he added.

Regarding how the digital euro is expected to impact banks and businesses, Georgakis noted that the Eurosystem would not change the current relationship customers have with payment service providers.

Licensed banks, payment institutions, and electronic money institutions would still offer their customers an additional payment option.

For businesses, he said they would have direct access to funds collected through the digital euro, potentially eliminating the 2-3 working days needed for electronic payments to clear today.

They would also be in a better position to negotiate lower fees compared to current electronic payment fees.

Georgakis further clarified that the digital euro is designed to be compatible with all existing devices, incorporating a variety of technologies to connect not only to the internet but also to NFC and QR code technologies, enabling direct peer-to-peer payments even in cases where there is no electricity or internet connection.

He stressed that the ECB places great importance on digital financial inclusion, ensuring that everyone, including those with limited digital skills, can use the digital euro.

Furthermore, Georgakis highlighted the importance of strengthening Europe’s strategic autonomy and resilience through the creation of the digital euro.

If issued, Eurozone citizens would have an additional choice beyond private sector options, which may be subject to sanctions.

He noted that currently in Cyprus and much of Europe, cards used originate from the United States.

Regarding the timeline for potential implementation, he stated that since November 2023, the preparatory phase for the digital euro has begun and is expected to last two years.

He further explained that the next phase would commence in November 2025, preparing for the possible issuance and deployment of the digital euro and defining its implementation scenarios.

In any case, he continued, the legislative process runs concurrently, and the ECB’s Governing Council will decide to issue a digital euro only after the legislative act is issued.