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Government payments among three priority use cases for digital euro: ECB

Euro notes and coins: as part of its digital euro investigations, the ECB has identified three types of payments as priority areas | Credit: Photo Mix; Pixabay

Government payments are among three use cases that officials have “singled out” for the “first release” of a potential digital euro, a senior figure at the European Central Bank (ECB) has said.

The ECB is half way through a two-year ‘investigation phase’ into a potential central bank digital currency (CBDC) for the 19-member eurozone. Insights into its latest thinking were provided today (7 September) by the Frankfurt-headquartered institution’s digital euro programme manager, Evelien Witlox, speaking at a virtual event titled ‘A Digital Euro: Challenges And Opportunities’.

In a presentation on the progress of the ECB’s digital euro explorations, Witlox said that payments ‘to and by’ governments, as well as person-to-person and consumer-to-business payments, were the three use-case areas being prioritised.

The ECB’s update will be of particular interest to those working in central government departments – particularly finance and tax ministries – with an interest in how CBDCs could be most relevant to their own operations. While such departments are – quite logically – allowing central banks to lead on CBDC matters, they are typically keeping at least a watchful eye on how CBDC issuance could affect what they do.

Many major nations are relatively non-committal on whether to launch a CBDC. But the People’s Bank of China (PBoC) is at an advanced stage of developing and trialling its digital yuan, and Nigeria’s eNaira and the Bahamas’ Sand Dollar are already live. In total, 68 per cent of central banks consider themselves ‘likely to’ or ‘might possibly’ issue a retail CBDC in the short or medium term, according to Bank for International Settlements (BIS) research published in May.

Digital euro use cases: where the focus lies

ECB executive board member Fabio Panetta has previously mentioned government payments as an area of interest in the CBDC context. Appearing before the European Parliament’s economic and monetary affairs committee on 30 March (making introductory remarks entitled ‘A digital euro that serves the needs of the public: striking the right balance’) he said a eurozone CBDC could be used for payments between governments and individuals “for example to pay out public welfare benefits or to pay taxes”.

During her opening remarks at today’s half-day event, which was organised by the European Economic and Social Committee (EESC) – a consultative body of the European Union (EU) – Witlox presented a slide, titled ‘Digital euro use cases’, that also displayed ‘business-initiated payments’ (for example, payments to another firm or wages) and ‘machine-initiated’ payments (for example, fully automated payments initiated by a device), alongside the three priority use cases. The fact these two cases were not highlighted does not mean “they are not being considered at all” but simply that a decision had been made to focus first on government, person-to-person and consumer-to-business payments, she told the audience.

Witlox also discussed the ECB’s digital euro project timeline, with September 2023 referenced as when the ECB’s Governing Council would “decide to possibly launch a realisation phase”; and set out how “excessive” use of a digital euro would be “avoided by design”.

‘Any undesirable consequences that may result from the issuance of digital euro for monetary policy, financial stability or the provision of services by financial intermediaries are best mitigated by design, pre-empting excessive uptake by means of quantity- and remuneration-based tools,’ according to one of her presentation slides, which stated that the design was ‘likely to include a combination of tools, to be parameterised closer to digital euro issuance, even if not necessarily active at the same time’.

In answer to a question from Global Government Fintech about the extent of the ECB’s engagement with the PBoC, Witlox said the ECB had “regular interaction” to exchange “thoughts and learnings”, as it also did with other central banks, as well as the Bank for International Settlements (BIS).

Financial and digital inclusion examined

Witlox was taking part in the event’s first panel session – ‘What, why and how? Institutional perspective on the introduction of a digital euro’ – alongside Jan Ceyssens, who is digital finance unit head in the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG Fisma).

The event featured a second session titled ‘The role of a digital euro in an inclusive, digital and sustainable economy’ that featured a five-strong panel: Alexandra Maniati, senior director for innovation and cybersecurity at the European Banking Federation (EBF); Alin Iacob, who is chairman of the Romanian Association of Financial Services Users (AURSF) and a board member of Better Finance; Karel Lannoo, who is chief executive of the Centre for European Policy Studies (CEPS) and general manager of the European Capital Markets Institute (ECMI); Prof Jean-Pierre of Sciences Po (France); and Digital Euro Association chairman Jonas Gross.

Among the technical, political and policy topics discussed during the event was the extent to which a eurozone CBDC could help with financial inclusion.

“We don’t see that there is a financial inclusion issue in the EU that – alone – would justify the issuance of a digital euro,” said the EBF’s Maniati, pointing out that an EU directive on payment accounts provides access for citizens, including asylum-seekers, to a basic payment account and related banking services. “Having said that, legal provisions apply regarding anti-money laundering and combatting terrorist financing [AML/CFT], and know-your-customer [KYC], and these legal obligations would also apply with a digital euro. So, in terms of financial inclusion we think that little impact could be expected,” she said.

“What is probably more of an issue is the question of digital inclusion because access to digital devices, such as a smart-phones, will be necessary to gain access to a digital euro,” Maniati added.


The Global Government Fintech Lab (held in Estonia in 1 June 2022) featured a panel session titled ‘How can CBDCs help deliver public good?’. Watch the session in full (46min 36sec) =>

Source: Global Government Forum YouTube page


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‘D€: unanswered questions (and quirks) amid Europe’s CBDC “nitty-gritty”’ – our analysis (20 September 2021) of eurozone central banks’ digital currency explorations

‘Digital euro tech investigations would take two years: ECB’s Panetta’ – our news story (15 April 2021) on a Fabio Panetta appearance before the European Parliament’s economic and monetary affairs committee (on 14 April 2021)