The Digital Euro Initiative – 8th ECB Simulation Conference
The Training Day serves as the inaugural day of the annual ECB Simulation Conference for university students, where distinguished representatives from institutions, businesses, and academia share their knowledge and experiences with the participants.
The Training Day for the 8th Conference took place at the Bank of Greece on November 22, 2024.
The key themes of the Conference were:
- Monetary Policy: The interaction with Fiscal Policy, the risk of fragmentation, and the challenges of effectiveness in a permacrisis environment.
- Climate Change and the transformation of the financial system in the field of ESG.
- Digital Euro: The impact on the payments landscape and financial stability.
The 8th Conference was made possible thanks to the invaluable support of the Bank of Greece, the Hellenic Bank Association, Alpha Bank, PwC Greece, the National Bank of Greece, and the Athens University of Economics and Business.
Here, we highlight the positions of the speakers during the discussion panel on the digital euro initiative and its potential impact on the existing payment systems. We are greatly honoured to have speakers such as Mr. Konstantinos Drakos, Professor, Department of Accounting and Finance, Athens University of Economics and Business, Mr. Antonis Ballis, Director of MSc FinTech, Lecturer (Assistant Professor) in Finance, Aston Business School, Mr. Christos Kalandranis, Assistant Professor of Corporate Finance, Department of Accounting and Finance, University of West Attica and Mr. Dimitris Anastasiou, Assistant Professor, Athens University of Economics and Business.
Following the presentation of Mr. Drakos, Mr. Dimitris Anastasiou presented the innovation of the Digital Euro, emphasizing its transformative potential for the financial sector. He highlighted that the Digital Euro is expected to revolutionize the industry by enabling 24/7 payments, both online and offline, while complementing cash. This will offer greater operational efficiency and will lower costs for cross-border transactions, enhancing global competitiveness.
To guarantee financial stability, Mr. Anastasiou noted that the ECB plans to implement restrictions on the amount of funds that can be held in Digital Euros and the scope of transactions through digital wallets. These measures aim to prevent significant deposit outflows from banks, ensuring the financial system remains undisturbed.
He further outlined the benefits of the Digital Euro, such as promoting financial inclusion, particularly for the 6% of Europeans without a bank account, and generating new revenue streams for banks through innovative services. However, he cautioned about challenges in cybersecurity, the substantial investment costs required for new technologies, and the potential for deposit outflows to digital wallets. This concern is particularly relevant for Greek banks, which have a smaller deposit base compared to their European counterparts.
The discussion panel concluded with Mr. Antonis Ballis, who addressed the challenges and opportunities associated with the Digital Euro, drawing lessons from the example of China’s digital currency (Digital Yuan). He noted that China has implemented a successful pilot program, setting different transaction limits for verified and unverified users. This approach has prevented deposit outflows while attracting foreign capital inflows.
Referring to Europe, he highlighted that the ECB has been slow in implementing the Digital Euro, allowing space and time for the private sector to develop alternatives such as stablecoins. He warned of the risk that depositors may lack incentives to keep their funds in traditional banks due to low interest rates, potentially leading to deposit losses.
Mr. Ballis further emphasized that discussions around the security and anonymity of digital currencies often lack substance, considering that existing technologies already face security challenges. He proposed the need for thorough public education and awareness campaigns about the Digital Euro to ensure its understanding and acceptance by the public. Lastly, he stressed that delays in the rollout of the Digital Euro could create a void that private initiatives might fill, posing significant risks to the monetary stability of the Eurozone.
The final discussion panel of the Training Day began with Mr. Konstantinos Drakos, who provided a comprehensive overview of the Digital Euro, emphasizing its necessity and strategic importance. He stated that the ECB must accelerate its efforts in developing the Digital Euro, as any delays would not be beneficial. He described it as an innovation with the potential to transform the financial sector, reducing the dependency on non-European payment providers, and enhancing financial inclusion, particularly for individuals without access to banking services.
While acknowledging the objective challenges associated with the Digital Euro, Mr. Drakos highlighted its potential to act as a catalyst for innovation and competitiveness. He noted that it could strengthen trust in public money and facilitate the transition to digital transformation.
Moving on, Mr. Christos Kallandranis analyzed the prospects and challenges of the Digital Euro, emphasizing the need for adaptability and foresight in digital transformation. He clarified that the Digital Euro is not intended to replace cash but to strengthen the existing currency by serving as a parallel, fully convertible means of payment.
He highlighted the significant increase in digital transactions in Greece, where approximately 50% of payments are digital, and 20% of interbank transactions are executed instantly through systems like IRIS. He explained that the Digital Euro can enhance trust in public money by providing secure, transparent, and cost-effective transactions. He also emphasized that, unlike cryptocurrencies, the Digital Euro offers stability, regulatory compliance, and the integration of new technologies.
Additionally, Mr. Kallandranis pointed out Digital Euro’s potential for both online and offline use, ensuring privacy and accountability while reducing dependence on non-European payment providers. Despite challenges such as cybersecurity risks and the need for investments in the banking sector, he stressed that the Digital Euro will act as a driver of innovation and operational efficiency, bolstering financial inclusion and the international competitiveness of the Eurozone.
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