Tuomas Välimäki, a board member at the Bank of Finland, was photographed at a news conference in Helsinki on 25 August 2020. (Roni Rekomaa – Lehtikuva)

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THE ADOPTION of a digital euro would not represent a significant change for Finnish consumers, views Tuomas Välimäki, a board member at the Bank of Finland.

“We in Finland are largely used to paying digitally. From that vantage point, the change wouldn’t be as big in Finland as it’d be in countries where up to 80 per cent of retail payments are made in cash,” he stated at an online news conference organised on Friday.

The European Central Bank’s (ECB) governing council decided last week to launch the investigation phase of a digital euro project. The 24-month stage will aim to address key issues regarding the design and distribution of the euro, with the findings forming the basis for making a decision on whether to proceed to the years-long implementation phase.

“Our work aims to ensure that in the digital age citizens and firms continue to have access to the safest form of money, central bank money,” Paschal Donohoe, the president of the Eurogroup, commented on 14 July.

Välimäki estimated that it will take a minimum of five years before consumers will have digital euros in their virtual wallets.

Launching the digital currency would be a significant development, according to him.

“A digital euro would deliver a form of payment that entails no credit risk, because a central bank is always capable of taking care of its responsibilities, and that offers strong privacy protection. A strong privacy protection and non-existence of credit risk are important characteristics for payments,” he stated.

Coins and banknotes are presently the only form of central bank money available to consumers, as the money spent with payment cards is commercial bank money. Digital central money, though, has been available to banks for a long time.

Although the use of cash has generally been on the decline, the amount of euro-denominated cash in circulation is presently higher than ever. Välimäki viewed that the launch of a digital euro would not signal the disappearance of cash, as the digital currency is considered primarily a means to supplement the current forms of paying with central bank money.

The issue of digital euros would necessitate that central banks make sure they will be capable of handling their primary responsibilities also in future.

“We’d have to make sure [the digital euro] wouldn’t jeopardise financial stability or undermine the effectiveness of monetary policy implementation,” explained Välimäki. “I think much of the money moved to the digital euro would come from cash, but obviously partly also from banks’ deposits. But we’ll have to make sure by limiting the amounts so that amounts of money that undermine financial stability aren’t moved to the digital euro, if it’s implemented.”

Aleksi Teivainen – HT

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