Q12: Would the digital euro be an alternative currency within the Eurosystem?

The European Central Bank answers:
No. Just as banknotes and coins are not alternative currencies, but rather different forms of the same currency, the digital euro would be just another way to pay in euro. The digital euro would accommodate people’s and firms’ growing preference to pay digitally.
We answer them:

Actually, the digital euro is not just “another way to pay”, but two distinct new methods of payment with very different properties. Relating it to banknotes instead of bank accounts may create the illusion that both the online and the offline version are comparable to cash, which is only the case insofar that both are issued by the ECB. Crucial differences with respect to privacy are further discussed in Q9.

While there is a general trend towards digital payments both online and in shops, reading that as a “preference” may be oversimplifying, especially as digital payment methods come with associated costs that are often not transparent to the buyer as those are absorbed in the price, independent of the specific cost structure of the payment method. There are also instances of firms being coerced into offering and using digital payment methods, which should not be mistaken for a chosen preference: For example, Italy was mandated by the European Union to require shops to accept credit card payments, even for small transactions [1]. At the same time, some shops refuse to accept cash, forcing customers to pay with cards [2]. Mastercard has taken advantage of the COVID-19 pandemic to run false campaigns about “unhealthy cash” in order to promote its business interests [3]. As an ECB study on the payments attitudes of consumers rightfully mentions, the decline in cash usage in shops from 72% (2019) to 59% (2022) was heavily influenced by the pandemic, and “may prove temporary” [4].

  1. AFP/The Local, Italy abandons plan to elt shops refuse card payments in budget u-turn. https://www.thelocal.it/20221219/italy-abandons-plan-to-let-shops-refuse-card-payments-in-budget-u-turn, 2022.
  2. Mathilde Farine, Les commerces peuvent refuser les achats en cash. https://www.letemps.ch/economie/finance/commerces-peuvent-refuser-achats-cash, 2020.
  3. N. Häring, How mastercard invented the health hazard of cash. https://norberthaering.de/en/war-on-cash/mastercard-holsten/, 2021.
  4. European Central Bank, Study on the payment attitudes of consumers in the euro area (SPACE) – 2022. https://www.ecb.europa.eu/stats/ecb_surveys/space/shared/pdf/ecb.spacereport202212~783ffdf46e.en.pdf, 2022.