In recent days, the Central Bank of Cyprus has presented the advantages of the digital euro, which is expected to change the way both citizens and businesses transact in the coming years with immediate processes and without intermediaries.

In simple terms, the digital euro will add another way to conduct transactions in digital form, without charges and with instant money transfers.

According to the ECB, the digital euro would enable secure immediate payments in physical and online stores and between individuals, regardless of the eurozone country they are in or the payment service provider they use. The ECB is currently exploring how this could work in practice.

Initially, citizens will need to create a digital euro wallet, where they can transfer money from a bank account or through cash deposits.

Each time you receive money in digital euros, you could keep it in this wallet, up to a specified limit, or transfer it to your bank account. You could do this manually or set it to be done automatically.

The ECB also notes that the digital euro could offer both online and offline functions, meaning you could use it even when your internet connection is poor or when you are offline. Additionally, the personal transaction details involving digital euro payments offline would be known only to the payer and the payee, providing a level of privacy similar to that of cash.

Now, regarding its advantages, these concern both citizens-businesses and supervisory authorities.

Specifically, with the digital euro, immediate transactions will occur. For example, businesses will have immediate access to these funds and will not be charged, unlike today, where if you pay a business with a credit card, there is a charge and a 2-3 day delay before the money is deposited into the account.

At the same time, however, the digital euro will provide useful tools to supervisory authorities. Specifically, with the use of the digital euro, the ECB will be able to collect real-time data by following the "money," which will help Central Banks better tackle money laundering and tax evasion.

Based on the above, another advantage arises related to the ECB's decisions. Specifically, by monitoring how much money and where it is moving in real-time, the ECB will be able to determine its monetary policy more quickly. For example, the delay observed in raising interest rates. According to banking circles, if this tool existed, the ECB could have made better and faster decisions regarding interest rates and inflation.

A key disadvantage is the challenges that will be observed in terms of all citizens accessing this service, as well as the infrastructure needed to operate it safely.

Specifically, the ECB will need to ensure that the infrastructures created provide the necessary security and reliability in using the digital euro, as it will be a target for hackers, and any interruption or problem in the platform's operation could cause chaos in the EU economies.

According to the ECB, following a two-year investigation phase, the ECB's Governing Council decided to proceed to a preparatory phase, which began on November 1, 2023.

The focus of the preparatory phase is the further development and testing of the digital euro, according to the design options and technical requirements identified during the investigation phase.

In this context, the Eurosystem is conducting extensive analyses, checks, tests, and consultations with stakeholders to ensure that the digital euro meets the highest standards of quality, security, and usability.

This phase will last two years and will be completed at the end of 2025, when the Governing Council will decide whether to proceed to the next phase of preparatory work and, if so, will define its scope and duration.