Think of a humble banknote. No matter how crumpled and torn as it is, it is the only government legal money – the only immediate obligation of a central bank – to which most people have access.

It is fundamental to many forms of private wealth, such as bank deposits. Their value ultimately depends on the possibility, if necessary, to convert to “cold”, hard cash.

So what will we do when funding is digital? The European Central Bank aspires to be among its first bonds that will fully deal with this question. This is an experiment worth watching closely.

For several years, the ECB has been preparing to issue what it calls it digital. Like a banknote, it will be money from the central bank, which can be transferred by its holder to anyone at will, without the need to verify the proficiency of capital.

Unlike the banknote, it could be on a smartphone and travel as a written message, reaching Budapest from Brussels at one point. If the European Parliament approves it, the first transactions could be made before the end of the decade.

Europeans could reasonably wonder why they need such innovation. After all, for a long time they can send money to each other in a matter of seconds. They can buy everything from clothes to ice cream, using Visa and Mastercard. The ECB estimates that such cards will account for 45% of purchases at points (value based) in 2024. Cash corresponded to 39%, from 54% in 2016, as a growing percentage of companies chose not to deal with them.

So why not let the digital euro take over? As attractive as the idea sounds, it is serious. Deposits are banks’ obligations, which may be very fragile to be reliable currency administrators – as the problems of Silicon Valley Bank in 2023 and Greek banks in the 2010s have shown. Supporting US -based institutions, such as Visa and Mastercard, may be legal.

If people had difficulty taking the euro in their hands issued by the Central Bank, they could lose their confidence in the currency. If they were turning to alternatives, such as dollars, the ECB could lose monetary policy control in the euro area.

On the contrary, the simple existence of a digital central bank currency – exchangeable money – would be stabilizing, even if almost no one used it. Beyond that, it would have many potential advantages. Could allow urgent transfers to vulnerable during crises such as the Covid-19 pandemic. If connected to other Central Banks digital coins could significantly reduce the cost and complexity of cross -border payments, including remittances

Of course, it involves its own dangers. If it becomes very popular, it could put banks out of service or give government officials excessive power to monitor or even control the transactions. However, such issues should be manageable. As designed at present, the digital euro will have individual occupation limits and will not pay interest.

Users will have access to it through banks or other providers, with stricter privacy standards than existing payment applications. Off -connection transactions will provide an anonymity level very close to cash.

The challenge for the ECB will be to achieve the right balance so that the digital euro – as well as the natural – be ubiquitous, but not so dominant as to displace “living” money. He should also do more to gain the trust of potential users.

Proper performance of these details will not be easy, but it is worth it. It is much better to have a digital currency issued by a government and not to need it, rather than to need it and not have it.