There is one and only one overwhelming reason for the European Central Bank to introduce a digital euro: to safeguard Europe’s sovereignty.
Stablecoins have the potential to destroy the euro. Really, I mean destroy. A fiat currency only exists because people choose to use it. If all of us decide to use pink marbles instead of euros and dollars, then this is it. There is no intrinsic value in any currency. Fiat currencies are no different from cryptocurrencies in that respect.
What fortifies them is their legal tender status. Shopkeepers cannot refuse to accept them. But buyers can.
It is not hard to foresee a future where all our shopping is digital — and where we use US dollar stablecoins for transactions, because they will be the most hassle-free means of payment.
There is nothing the ECB or member states can do to stop us. And this is what European policymakers fail to understand.
Digital cash
A digital euro in its purest form would be like cash in a digital wallet. There would be no intermediary.
As with cash, the central bank would issue the digital euros and record them as a liability in its balance sheet. The users would not even need a bank account. Or credit cards.