Workers hold up the huge euro logo outside the headquarters of the European Central Bank (ECB) in Frankfurt, December 6, 2011. REUTERS / Ralph Orlowski / File Photo

FRANKFURT, June 2 (Reuters) – The creation of a digital euro could strengthen the international status of the single currency by making it easier to use to pay or save, the European Central Bank said on Wednesday.

The European Commission has set itself a goal of stimulating the use of the euro outside the euro area, which has stagnated for years and declined slightly in 2020 due to the coronavirus pandemic.

The ECB has said that a digital euro could increase the attractiveness of the euro, although the health and size of the euro area economy is more important.

“Security, low transaction costs and consolidation effects could facilitate the international adoption of a currency,” the ECB said.

However, opening up a digital euro to foreigners would also come with risks, such as opening a gateway for money laundering or facilitating runs on weaker currencies in times of crisis.

The ECB said these issues could be addressed in the design of the digital currency, for example by setting a cap on how much each citizen can own or by forcing disclosure.

“Transparency or selective confidentiality would allow better compliance and know-your-customer controls to be implemented, thereby controlling illicit payment flows, for example for large transactions,” the ECB said.

“These guarantees would strengthen the reputation and credibility of the digital euro.”

The euro accounted for just under 22% of all global foreign exchange reserves last year, far behind the 59% share of the US dollar.

The ECB has not officially decided whether or not to introduce a digital euro and no launch is expected for four or five years.

Reporting by Francesco Canepa Editing by Chizu Nomiyama

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