 It feels like the world is literally moving under our feet, said supervisory board member Elisabeth McCall in our previous episode. She describes so well the pace at which we are moving towards an ever more digitalized world. And this brings me to our topic today, the digital euro. Because the way we buy things is no exception. The share of online payments has nearly tripled over the past three years. It's all moving so fast. Our grandparents use checks, our parents mostly cash, and we are happy to pay by card, phone, or even with our watches. New solutions pop up constantly, and at the same time, the only central bank money is cash. It is most secure, it guarantees privacy and flexibility. And this is what we want to offer with the digital euro. You're listening to the ECB podcast, bringing you insights into the world of economics and central banking. My name is Stefania Secola. There's a lot of interest in this topic, there are a lot of open questions, and there are also quite some misconceptions. So what I want to do today is take stock and bust some myths. With me is Evelyn Vitlox, who's leading the digital euro project here at the ECB. Welcome back to the podcast, Evelyn. Great to have you. Thank you. It's a pleasure to be back. We've reached an important milestone in the digital euro project, the completion of the investigation phase. And the governing council has just decided that we are moving into the next phase, the so-called preparation phase. This brings me to the first myth that I would like to bust. We will soon be able to pay with the digital euro. Evelyn, what does this decision mean? Thank you for asking the question, because it's indeed a question I get more often. So the decision that the governing council took is to move to a preparation phase, and that means that we will prepare ourselves further to be ready, if at any point in time a decision will be taken to issue a digital euro. Before the decision can be taken, a couple of things need to have happened. Most importantly, the legislative proposal, which has been proposed by the European Commission, needs to have gone through the democratic process and end up into a legislation. So and only after that, the governing council will consider to decide to issue a digital euro. So one of the important factors for a timeline that will affect when a digital euro could be there is the legislative debate. But we all know at least the people that have been working in payments is that developing a payment system and even more with a digital euro, we actually create more than a payment system. We really issue a new form of the euro. That takes time. So what we will do in parallel with the legislative debate and the process that is running, we will further prepare ourselves. And that will take some time. So the preparation phase that has now been approved will last for two years. And there we will focus on looking who could be the suppliers for the solution. And that will also inform on which technology the digital euro would be built upon. And in parallel, we will also further work on the design and standardization that makes sure that the digital euro can be accessed everywhere so that you can get it everywhere, but that also that you can pay everywhere in the euro zone. But it will take some time before we will get there. It sounds like indeed indeed. And today I can already pay digitally with my bank card, my phone or even the watch. So here is the second myth. There is no need for a digital euro. Evelyn, what do you say to that? Indeed, you have chosen your topics very well. This is asked a lot, but I think it's the wrong question. Because one of the most specific things of the digital euro is that it's central bank money. So currently you have two ways to pay. So either you pay with cash, which is a central bank money, or you put your deposits at a bank and then the bank allows you to pay with digital means. And now we're moving into an age where people pay more and more digitally. So this is not because the ECB is not committed to cash, but we see the preference of the people is to pay more digitally. And we believe that it's important that we make sure that also in the future people have a public means of payment and that they have direct access, like they have with cash to central bank money. So that would mean that towards the future there would be an additional choice. So either you pay with cash, you pay with the current solutions that are there from commercial private companies, or you can pay with a digital euro. It's also important to think the counterfactual, because if the central bank would not do this, and we continue the current development of the way we pay, which is more and more digitally, then towards the future the only way to pay would be with private means of payments. And we believe that payment is so important for all of us, that it's important that there is also a public good like the digital euro that can ensure that there is a high level of privacy that there is sufficient attention for financial and digital inclusion. So in short, that's the reason why it's important that we consider a digital euro and that we prepare ourselves for the future. Yeah, absolutely. And it looks like this is what is happening. Now, in the past, you also indicated how the digital euro would look like in previous episodes. And for the listeners, we will add these links to the show notes. The next myth is then a digital euro will ultimately replace cash. You mentioned several times it's not the case, but maybe you want to tell us a bit more about it. Yeah. Well, so we have been very explicit from the start, is that the digital euro will be an additional choice, so it will not replace cash. Cash is central bank money. So we love cash and we stay committed to cash. We have also even issued a new design for the bank notes going forward. So the commitment to cash is still there. But as I said, the end users, so the citizens and merchants more and more have a preference to pay digitally. And in some environments, you cannot pay differently than on a digital. It's very difficult to pay in cash when you order something online. So with the digital euro, what we want to do is to offer an additional solution, which I just explained in the other question. One of the most important features is that it's a public good. It's central bank money. But we also want to transport in its design some of the most valued features from cash. So one I touched upon briefly already. So we will make sure that we focus on a very high level of privacy. And we have currently thought about two types of digital euros. One would be an online one, which would look a bit like what people already know. But the other one would be an offline digital euro, which would be very much like cash. So it would mean that you would hold your digital euros either on your phone or on a card and that only by holding those two together with another one, the money is transferred from one device to the other. So then the level of privacy that we can deliver is very close to cash. That's one element of the digital euro and its design where we want to take the cash like advantages along. Can we say it's digital cash? And can we call it digital cash in this case? Yes. Well, we need to be clear that because it's digital, it cannot be one on one the same as cash. But with the design, we try to come as close as possible to cash while making it available in a digital environment. And is it secure, private and universally accepted like cash? Yes. And especially the last point is also very important. So we design it in a way that you can use it all over the euro area in a similar way. And that is true for person-to-person payments. It's true for payments in a shop or online or from governments and to governments. And we will make sure that you have only one payment method, which is then the digital euro, which you can use in all these use cases and in all these countries. And that is currently something that is not existing yet. Yes, yes. And the fact that it's so modern and progressive is super interesting and is what is bringing us forward and also is bringing me to the next myth. The digital euro is only for young people in big cities. For example, it excludes people who don't have a phone. Is that true? No, that's not true. So as I said, the digital euro would be like cash, really a public good. So financial inclusion is important, but we also very much look to digital financial inclusion. And we know that for some people, it's more difficult to go along with all these changes. So therefore, we also have really taken into the design that there would be ways for people that would find this difficult, that we can take them along. And one of the things is that also a physical card can be provided in order to do these payments, for example. But also that there would be in-person support if you want to start using a digital euro, for example. Interesting. I have another myth for you, Evelyn. The ECB sees what I spend my money on and it uses the data for all kinds of things. So some people are extremely worried about this, about privacy. You mentioned it before. But let's talk about these fears a bit more in depth. Will the ECB collect personal data with the digital euro? And if so, for which purpose? Well, thank you very much for this question. So no, the euro system will not be in need to have personal data. And the data that we would have in order to settle on transactions or to make sure that the money moves from one to the other will be pseudonymized. So that means that we can never connect it to any private individual. And the way we can do that is because the distribution will be going through intermediaries. That's a difficult word for banks or payment service providers. They would know who you are, but they would not share this information with the euro system that settles the payment. So in that way, we can deliver a high level of privacy. And as I said before, and I think it's an important feature, is the offline digital euro. There, even in the transaction, it would be like a bank note. So we hold these two devices to each other, so either a card or a phone. And then the money moves from this device to the other device. So it doesn't go over an internet network or a connection. So nobody will see it, like if I would give you a bank note from one to the other. And since I'm on the topic of offline, I want to put one additional, because in the last question you asked also on it's for people only in the city. And so that's not the case in general. It's not the case. But with offline, we also facilitate for more rural areas where there is not always internet connectivity, for example. And then with an offline digital euro, you can still pay. So with the design of the digital euro, we really make sure that you can pay everywhere in the euro area, even if there's no electricity or no internet coverage. So it's really inclusive for everybody. Exactly. I was about to say this means really inclusive. Yeah. And so let's go on a final myth then. The ECB is working on this all alone from its ivory tower. Evelyn, what do you have to say to that? Well, I can testify that this is not the case. So maybe let me start with the fact that the ECB is not on its own working on CBDC. More than 90% of the central banks worldwide are working on central bank digital currency. Some have already implemented solutions. Some are experimenting. Some are designing. So there are different levels. But actually, the majority, well, I should say, almost all central banks are looking in the topic of CBDC. So it's not something that we do on our own. Then since this is something for the euro area and it affects everybody's life, we feel that we cannot do this on our own and we're not doing this on our own. So in the in the last two years, we have very actively reached out to all stakeholders. So we have worked closely with the European Commission. We have gone to the European Parliament roughly every second month. We have also set up more stakeholder groups. So we work with the market advisory group where we have professionals that are there on their personal title to advise us on the design. And we work together with the European Retail Payments Board. And that's a mouthful, I understand. But it's an important body because there we have all the major stakeholders represented. So we have the consumers. We have the merchants. And then we have financial institutions being banks or non-bank financial institutions at the table. And also via the ECB we have also done four sessions with civil society organizations. So a large part of the work is really reaching out and developing the digital euro with all stakeholders involved. And in the preparation phase, we very much want to continue to do that. Absolutely, absolutely. Thanks, Evelyn. And before we wrap up, we always have questions for our guests. And that's for a hot tip on today's topic. So the digital euro. Evelyn, what do you have for us today? Thank you. Well, I thought about this before because it was not an easy question. And my answer is a bit wider than the digital euro alone. But my tip is the movie. Everything, everywhere, all at once. I'm not sure if you have seen it, but it's a very creative movie, I would say. Also picturing all kind of realities that there could be. And as you might know or might not know, is from my background, I'm a technical engineer. So I'm trained to be very analytical. But I have learned in my career that creativity is also very important. So with the digital euro, we need to imagine a future. And probably we don't know how the future looks like. So we need to probably imagine multiple futures. And from there, find creative solutions that would fit the needs of the future. So that was the tip that I wanted to give for today. Thank you so much, Evelyn. And this brings us to the end of the episode. I want to thank Evelyn Witlocks, who's leading the Digital Europe project here at ECB for this very interesting conversation. Thank you. Thank you, what a pleasure. Dear listeners, check out the show notes for more on this topic. You've been listening to the ECB podcast with Stefania Serkola. If you like what you've heard, please subscribe and leave us a review. And in the spirit of Europe, I'd like to end in Dutch this time and say hot horns. Until next time, thanks for listening.