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Digital Euro Could Either Help or Harm Economy, ECB Paper Says

Mining farms
Photographer: Andrey Rudakov/Bloomberg

Digital central bank money for use by the general public could help monetary policy to reach the economy more directly, according to research by the European Central Bank. It could also have the opposite effect, though.

A central-bank issued digital currency would allow people in the euro area to deposit with it directly, providing a risk-free avenue for using money in an increasingly online economy, a publication by an ECB task force said Friday. Holders of a such a euro might, however, induce the draining of liquidity from the financial system, which could be particularly dangerous during downturns.