Home > Uncategorized > What is a digital euro?

What is a digital euro?

from Norbert Häring

Deposits at banks that are denominated in euro and can be used for all sorts of digital payments are already in existence. However, these deposits legally are only loans from the depositors to the banks which confer the right to be paid back with real money, i.e. physical euros issued by the central bank. A genuine digital euro would be digital money from the central bank.

So far, only banks have access to digital central bank money. They have account balances at the central bank through which they effect payment transactions among themselves. The main innovation of digital central bank money (for everyone) would be that everyone would have direct or indirect access to such central bank money, and could use it for digital payment transactions. There are two ways to achieve this:

  1. Everyone gets an account at the central bank for payment transactions. The balances on this account are exchangeable on a one-to-one basis with balances at commercial banks or cash. Like cash, these balances are not at risk of insolvency because the central bank is behind them.
  2. Alternatively, citizens would have special accounts at commercial banks for digital central bank money. Unlike normal bank deposits, the balance on these accounts is not a loan to the bank, but an escrow account. The account holder is the owner of the money on it, the bank only manages it as a service provider. If these accounts exist, the digital central bank money can be transfered from some commercial bank’s central bank account to a private CBDC-account at a commercial bank.

If the central bank would want to protect financial privacy of citizens, it could offer the possibility to load the digital euros onto anonymous electronic wallets or cards that can be used to make anonymous payments. That sounds good and it could be. But there is a big downside. It will not happen.


  1. March 5, 2021 at 3:42 pm

    Norbert Häring wants a digital EU currency that 1. create a supplement for cash that protects privacy better than other digital means of payment; 2. give citizens and companies an alternative to bank money which always carries the risk of bankruptcy, 3. curtail the power of banks, by taking away or limiting their power to create money, 4. help prevent a private company such as Facebook, with its own globally accepted currency, from crowding out the euro in payment transactions, 5. prevent China from using its digital yuan to replace the euro (or the dollar) as a transaction currency.

    None of these goals has any social value, and are only the preoccupation of a chattering class of obsessive money-freaks. Most importantly, banks do not create money (M4). If they did, why do they have to rent it from depositors?

    • March 5, 2021 at 7:10 pm

      I find 1-4 above to have social value and wonder why you say they don’t. As for (5), I am uncertain.

      • March 5, 2021 at 10:02 pm

        (1) “privacy” is what drug-dealers and criminals require. (2) bank money is guaranteed to £85k by UK govt, if you have more open multiple accounts; (3) banks don’t create money, as I said; (4) transactions cannot be “crowded out”; (5) the antipathy to China is just racism – why shouldn’t it offer a payment service?

    • March 5, 2021 at 10:34 pm

      “(1) “privacy” is what drug-dealers and criminals require.”

      I see absolutely no reason why anyone but myself should have information on what I buy legally for myself or my family, what magazines or books I read or websites I frequent or donate to, where I purchase my clothes, et cetera. Saying I have no interest in personal privacy or must be a criminal of some kind because I do have an interest in maintaining it seems a wee bit authoritarian.

      ” (2) bank money is guaranteed” by government. Recent legislation in some countries is disturbing in that deposits in banks can be treated as assets of the bank itself, placing those deposits at risk. Look up bank ‘bail ins’. True that there is insurance up to given amounts but who wants to have to maintain, say, 100 bank accounts in different banks?

      “(3) banks don’t create money”. They create loans effectively out of thin air. These are money.

      “(4) transactions cannot be “crowded out”. I don’t know that. What I do know is that I do not want private corporations in the money supply business.

      I have no problems with China nor with its reasons for seeking to establish alternatives to petrodollars.

      • March 6, 2021 at 12:28 pm

        To say banks create money because they make loans is like confusing turnover with profits. You are ignoring money destruction, the rate of which is entirely outside of bank control. Net money creation is therefore a collective act, meaning it is more accurate to state that the economy creates money. This is empirically supported: when the economy grows, so does M4, when it shrinks, so does M4. There is nothing the banks can do to change either of those facts.

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