Issue link: https://maltatoday.uberflip.com/i/1538544
3 maltatoday | SUNDAY • 17 AUGUST 2025 NEWS From cash to code: How the digital euro could change the way people pay AS digital and online transac- tions become increasingly em- bedded in everyday life, cen- tral banks around the world are adapting to keep pace with evolving financial habits and technological advances. In this context, the European Central Bank (ECB) is actively working on the development of a digital euro, a new form of central bank money designed for the digital age. The initia- tive is aimed at ensuring the euro remains fit for purpose in a fast-changing payments landscape, while safeguarding monetary sovereignty and fi- nancial stability. The digital euro is de- scribed by the ECB web- site as an electronic means of payment avail- able free of charge to everyone. "Like cash today, you could use it anywhere in the euro area, and it would be secure and private. In our increasingly digitalised society, a digital euro would be the next step forward for our single cur- rency," it said. The digital euro would be stored in an electronic wal- let set up with a bank or with a public intermediary. This would allow people to make all their usual electronic pay- ments: at their store, online, to a friend, or with their phone or card, online and offline. But will the digital euro affect people's financial habits? Will it change the way they bank? To better understand what a digital euro could mean for Malta and its financial ecosys- tem, MaltaToday spoke with Central Bank of Malta Deputy Governor Alexander Demarco. He explained the digital euro will not be replacing banknotes or coins, but rather comple- ments them. "Even well before the COVID pandemic, shopping over the internet had been growing sig- nificantly, especially in Malta. […] However, it is not possible to use cash through this me- dium of exchange as the use of banknotes requires physical proximity, like purchasing in a phys- i c a l store or in an exchange be- tween two persons. While a citizen would still be able to use the digital euro in physical stores or in person-to-person transactions, it has the added convenience of being able to use the same instrument, i.e. central bank money, to under- take purchases over the inter- net, and between persons, even if these are not physically near each other," he explained. He said the upside to the digi- tal euro is that it makes use of a common infrastructure across payment services providers, both nationally and across the Eurosystem. This according to Demarco, makes it easier and cheaper for citizens to make payments to businesses or oth- er citizens independent of the choice of payment service pro- vider. The acting Central Bank gov- ernor said it can be used an- ywhere, with plans to make it available in countries from outside the euro area through agreements with respective countries' central bank. Is it so different from having a credit card? From BOV to Revolut to Cash App, credit and bank cards are widely accessible to users for their banking needs. Demarco said the digital euro will not make these technologies ob- solete, but rather compliment them. "It is no different from using one's bank card to make pur- chases as one could use the dig- ital euro through a specifically dedicated app by the Eurosys- tem for the digital euro or one could use the service provider's own specific application for this purpose," he said. This can be used when making purchases in a physical shop, person-to-person, or over the internet. But it will also have an offline functionality so that it can be used both in physical stores and in person-to-person transactions even in the ab- sence of mobile reception or WiFi communication." If a person does not have a smartphone, one could still use the digital euro to make pay- ments using a card. In the case of offline pay- ments, the card would func- tion like a pre-paid card, but in the case of online payments, whether over the internet or in a physical store, its use would be like that of existing cards, depending on the funds avail- able in the digital euro account. However, a digital euro user could instruct his payment ser- vice provider to automatical- ly withdraw funds from their bank account to provide suf- ficient funds in the digital eu- ro account to enable payment transactions in excess of the funds available in the digital euro account at the time of the purchase. Alongside the digital euro, one could still use other pay- ment applications, like SEPA, that are linked to a commercial bank account, where in such cases payments are made in commercial bank money and not central bank money, which is the case for the digital euro and banknotes and coins. A threat to cryptocurrency? Over the past decade or so, cryptocurrency like Bitcoin and Ethereum have exploded across the globe. At the time of writing one Bitcoin is valued at around €98,388. Demarco was asked whether the digital euro will be compet- ing against cryptocurrencies, or whether the technology's application varies. "Citizens are free to choose whatever means of payment they wish to choose," he said. The digital euro will be an- other choice for citizens, that together with banknotes and coins, will provide citizens the opportunity to use public money, issued by the Europe- an Central Bank, when making person-to-person transactions, in a physical store, and elec- tronically, both online and of- fline." He said crypto assets, like Bit- coin and Ethereum, could be used for payment purposes, but unlike the digital euro they will not enjoy legal tender status and the widespread acceptance that it implies. "Crypto assets will also con- tinue to be characterised by volatility in their value, where- as one digital euro will remain equivalent to one physical eu- ro. Other means of payment will continue to co-exist with the digital euro, and that is fine as long as consumers have the choice to pay with public money for whichever payment channel it is convenient for them to choose," he said. KARL AZZOPARDI kazzopardi@mediatoday.com.mt A digital euro will make it easier and cheaper for citizens to make payments to businesses or other citizens independent of the choice of payment service provider, CBM Deputy Governor Alexander Demarco (inset - Photo by Melvin Bugeja CBM) says