Welcome to Thoughts on the Market.

I am Reza Mogadam, Morgan Stanley's Chief Economic Advisor.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about

Europe's plans to introduce a digital central bank currency.

It's Thursday, June 10 at 4 p.m. in London.

After much consultation and reflection, the European central bank is set to soon announce

the trial launch of a digital euro, a digital version of cash that will circulate alongside

euro notes and coins.

I will address three sets of questions today.

First, why and why now?

Second, what are the risks and what is the ECB going to do about them?

And third, what are the policy implications?

Let's start with the why of going digital.

Conceptually, the key driver is the declining role of physical cash as a means of payments

as people switch from using cash to using bank cards and transfers.

This is an issue because all banking ultimately rests on people's confidence in the ability

to convert bank deposits into real money, i.e. cash.

What if cash effectively vanishes as it largely has for millennials, what will underpin that

confidence, what would deposits be convertible into?

A central bank digital currency answers that fundamental question about the stability

of the financial system.

Okay, but the decline of cash is not news, why react now?

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