not only the citizens of the euro area, but also non - euro area residents with cash holdings in the current national currencies of the euro area countries will prepare themselves for the cash changeover. in particular, this affects inhabitants from central and eastern europe using deutsche mark banknotes in parallel with their respective national currencies. according to estimates made by the deutsche bundesbank, deutsche mark holdings abroad in the mid - 1990s accounted for around 30 % to 40 % of the german currency in circulation ( see franz seitz : the circulation of the deutsche mark abroad, discussion paper 1 / 95, deutsche bundesbank, may 1995 ). that is equivalent to around eur 45 billion, which could potentially flow back into the euro area, presuming that the amount has remained unchanged since then. according to all available sources, the actual flowback of cash holdings from abroad should, however, be a lot lower. owing to its geographical proximity and the close trade links with central and eastern europe, the deutsche mark is used in many countries not only as a store of value but also as a transaction currency. therefore, it is unlikely that the demand for the deutsche mark will be completely replaced by a demand for other non - euro area currencies. in addition to this, the exchange of national currencies of the euro area for euro will equally be possible outside of the euro area and it will probably also be used to a large extent by the population. it is difficult to speculate over the behaviour of the informal side of the economy. at the same time, however, it should not be forgotten that we are talking about a relatively small part of the economy, even though this part of the economy uses cash to a relatively large extent. in addition, empirical findings have, to date, given no hard evidence of any significant flowback of deutsche mark banknotes from abroad. in the light of this, it is unlikely that there will be any major effects on the growth of m3 or any significant impact on the exchange rate of the euro as a result of the euro cash changeover. in addition, the ecb will also closely monitor the potential price risks relating to the euro cash changeover. in principle, it cannot be ruled out that businesses will try to use the changeover to the euro in order to introduce price increases. this would temporarily affect inflationary developments in the euro area. in this respect, the use of the dual price display method for a while will be of benefit

financial services, thanks to their very large customer base and global operations. it is against this backdrop that we need to assess the merits of a digital euro. kosse, a., & mattei, i. ( 2023 ). making headway - results of the 2022 bis survey on central bank digital currencies and crypto. bis papers. https : / / www. ecb. europa. eu / press / pr / date / 2023 / html / ecb. pr231018 ~ 111a014ae7. en. html. today i will first examine the most important current shortcomings of the european digital payments market and the risk that these shortcomings will be exacerbated by the quest for dominance of technology platforms in a counterfactual scenario where a digital euro is not issued. i will then argue that the digital euro would offer clear advantages in ensuring a competitive, innovative, open and secure digital payment system, while maintaining the highest standards of privacy protection. i will also discuss how potential risks to the financial sector can be effectively mitigated through the careful design of safeguards. the counterfactual : technology firms ’ quest for dominance the rapid digitisation of payments is a prevailing trend that was accelerated by the covid - 19 pandemic. the share of payments made via mobile applications and the share of consumer online payments tripled in the euro area between 2019 and 2022. 5 consumers are clearly embracing the efficiency and convenience of digital payments. however, this transformation is associated with a number of challenges for the european payments market. while pan - european credit transfers and direct debits work thanks to european payment schemes and infrastructures, 6 this is not the case for cards and certain types of online payments – whose use is growing disproportionately. this means that, as digitalisation progresses, pan - european payments are in the hands of international players, increasing our dependence on the payment rails they provide. a handful of international companies dominate domestic and cross - border card and online payments. international card schemes operate payment networks that are exclusively compatible with their point - of - sale terminals. this situation raises barriers to entry and expansion and discourages potential competitors from setting up new payment networks. the situation remains largely unchanged despite regulatory initiative and competition law enforcement. 7 the decision of european banks to abandon their plans for a continent - wide card scheme is a stark illustration of the dominant position held by these firms. 8