The European Central Bank abandoned the suggestion of compensation and incentive measures for digital euro

It is reported that Fabio Panetta, President of the European Central Bank (ECB), delivered a speech on digital euro, in which he outlined the current progress of the Central Bank’s digital currency (CBDC), including the “principle of compensation model for incentive allocation”. The principle of digital euro compensation is to provide consumers with free basic payment needs, generate the network effect of economic incentives for acquirers and merchants, provide comparable economic incentives for issuers, and bear their own costs for the euro system, as for the production and issuance of notes.

Interpretation of this information:

In a recent speech, Fabio Panetta, President of the European Central Bank (ECB), discussed the current state of the digital euro and highlighted a key feature known as the “principle of compensation model for incentive allocation.” This principle is designed to provide consumers with free basic payment needs while also creating a network effect of economic incentives for acquirers and merchants. Issuers of the digital euro will also receive comparable economic incentives while bearing the costs of production and issuance.

The compensation model for incentive allocation is an important aspect of the digital euro that seeks to incentivize various stakeholders in the payment ecosystem while also ensuring that costs are distributed fairly. Consumers will enjoy free basic payment needs, which will be a major draw for using the digital euro over other traditional payment methods. With the network effect of economic incentives for acquirers and merchants, there will be more opportunities for merchants to accept digital euros, which will only further drive adoption.

For issuers of the digital euro, they will receive comparable economic incentives that will help offset the costs of production and issuance. This is important for the success of the digital euro as issuers may be hesitant to participate if they are not adequately compensated for their efforts. By bearing their own costs, the euro system can ensure that the digital euro is a self-sustaining payment method that does not require external subsidies.

Ultimately, the principle of compensation model for incentive allocation is a key feature of the digital euro that seeks to create a fair and competitive payment ecosystem. By providing free basic payment needs for consumers and generating economic incentives for other stakeholders, the digital euro can become a widely adopted payment method that is sustainable over the long term.