Klaas Knot, president of the Dutch Central Bank, told the Ambrosetti Finance Workshop that a digital euro could ease the bloc’s dependence on non-European technologies for payment systems whilst maintaining “all the good things of cash.”
“Everywhere you look, the world around us is digitalising rapidly,” said Knot. “And so, you might ask: isn’t it high time for the coins and banknotes in our wallets to do the same? Isn’t it high time for our central bank currencies to go digital? And the answer is, of course, yes.”
The Ambrosetti Forum is organized by consulting firm ‘The European House – Ambrosetti’. It is an annual international economic conference held in Italy that brings together heads of state, ministers, Nobel laureates, and businesspeople to discuss current challenges to the world’s economies and societies.
This year, Dutch economist and central banker Knot, who is also currently President of the Dutch Central Bank (De Nederlandsche Bank), was one of the speakers for a panel on ‘Central Bank Digital Currencies (CBDCs): The Future of Money,’ during which Knot sought to calm some of the fears around the idea of a digital euro, and CBDCs in general.
“A digital euro would not upend the healthy equilibrium that has existed for decades between bank deposits and central bank money, between private money and public money,” said Knot. He also touched on some anti-CBDC sentiment in the digital asset space from supporters of private blockchain and tokens, suggesting that “a digital public currency will not crowd-out private initiatives.”
In Europe, the topic is not just hypothetical, with the EU inching ever closer to a retail CBDC.
The European Commission unveiled legislative proposals in June 2023, detailing a plan to make a CBDC legal tender and available across the eurozone while still preserving cash payments. In November 2023, the European Central Bank (ECB), which would oversee a CBDC, proceeded to the “preparation phase” of the project and began testing to explore technicalities and operational procedures. The ECB is expected to formally start experiments on a digital euro in the second quarter of 2024.
Despite European enthusiasm for a CBDC, fears remain around the controversial monetary evolution, some of which Knot addressed in his speech to the Ambrosetti Forum.
“With such a leap into the digital realm, we would extend the public’s trust in physical banknotes to the digital world,” said Knot. “To do so successfully, a banknote’s digital twin must have the same features as physical banknotes have today.”
These ‘features’ included that “no one needs to know what you pay for with digital euros, just like with cash”—the idea that CBDCs come at the cost of privacy and the surveillance state is a common misconception with the technology—and “everyone must be able to use the digital euro, including the less digitally savvy. Just like cash.”
However, Knot admitted that bankers, such as himself, would not have the final say on a digital euro, which would be a decision “ultimately for the European co-legislators.”
Knot concluded his remarks on the topic by posing the rhetorical question, “Why do we need a central bank digital currency?” To which his emphatic answer was, “To keep up with society. To pursue strategic autonomy. And to maintain access to public money in a digital world.”
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs are more than just digital money
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