ECB Affirms Cash Stays as Digital Euro Takes Shape

European Central Bank (ECB) officials have reiterated that physical euro cash will remain a fundamental component of the region’s financial system, even as digital transactions continue to gain momentum. The ECB is preparing to introduce a digital euro to complement, rather than replace, physical cash. In a blog post titled “Making euro cash fit for the future,” ECB Executive Board Member Piero Cipollone emphasized the enduring importance of cash, both as a medium of exchange and a store of value [1].

Cipollone stated that cash remains indispensable and that the ECB is modernizing banknotes to ensure they stay accessible and widely accepted. A digital euro will bring the advantages of cash—such as reliability and anonymity—to the digital payment space, creating a dual payment system that supports both physical and digital transactions [1].

According to the ECB, the demand for euro banknotes remains strong. Approximately €1.6 trillion worth of euro banknotes is in circulation, with cash usage growing at an annual rate of 2.3%. The central bank highlighted that cash demand surged during past crises, including the 2008 financial crisis, the sovereign debt crisis, and the pandemic, reinforcing its role as a stabilizing force in times of uncertainty [1].

To maintain equitable access to cash, the ECB is working on a regulatory framework that includes monitoring and assessing cash access points across the eurozone. The goal is to prevent cash deserts—areas where access to cash services is limited—especially in rural and underserved regions. The ECB is collaborating with national central banks to develop metrics that account for geographic and demographic differences [1].

The bank has also raised concerns about “no cash” policies, where businesses refuse to accept physical currency. The ECB has criticized such practices and is advocating for rules that enforce cash acceptance, particularly in essential services like public transportation. The Court of Justice of the European Union has supported the ECB’s stance, stating that cash must be accepted unless both parties agree otherwise [1].

In addition, the ECB is modernizing euro banknotes with enhanced anti-counterfeit technology to ensure they remain practical and secure in the digital age. The central bank also announced a two-track plan to utilize central bank money for distributed ledger technology (DLT) transactions. The first approach, known as “Pontes,” will connect DLT platforms with Eurosystem TARGET services and is expected to launch by 2026. The second track will allow the ECB to evaluate DLT-based trial requests prior to the pilot launch [1].

The ECB’s strategy reflects a broader effort to future-proof cash while embracing digital innovation. By maintaining the legal tender status of physical euro cash and laying the groundwork for a digital euro, the ECB aims to provide Europeans with a secure, flexible, and inclusive payment system that meets the needs of a rapidly evolving economy [1].

Source: [1] ECB Says Cash Will Stay, Even as Digital Payments Grow (https://cryptonews.com/news/ecb-says-cash-will-stay-even-as-digital-payments-grow/)