THE DIGITAL EURO AND CENTRAL BANK DIGITAL CURRENCIES (CBDCs): CHALLENGES FOR MONETARY POLICY, FINANCIAL STABILITY, AND THE FUTURE OF PAYMENT SYSTEMS

Abstract

The digital transformation of the financial system in recent years has prompted central banks worldwide to intensify their research and development of Central Bank Digital Currencies (CBDCs). Among the most prominent initiatives is the digital euro project, which represents a response to the rapid proliferation of digital payment methods, the rise of private digital currencies, and the imperative to preserve monetary sovereignty and financial stability. The subject of this research is the analysis of the digital euro concept and its potential economic and institutional implications. The study aims to examine the prospective effects of introducing the digital euro on the implementation of monetary policy, the operations of the banking sector, the efficiency of payment systems, and the stability of the financial system. Furthermore, it addresses the challenges this form of currency may pose to non-eurozone countries, with a particular focus on Serbia. The methodology applied in this research encompasses a content analysis of relevant domestic and international scientific literature, the comparative method, institutional analysis, and descriptive statistics based on available data from international financial institutions. The research findings indicate that the digital euro can enhance the security, accessibility, and efficiency of payment systems, increase the resilience of the monetary system, and stimulate innovation within the financial sector. Concurrently, its implementation raises critical concerns regarding user privacy protection, the potential disintermediation and reduction of the commercial bank deposit base, cybersecurity risks, and the adaptation of the regulatory framework. The scientific contribution of this paper lies in its critical analysis of contemporary approaches to CBDC development and its comparative assessment of the digital euro's potential implications on the financial systems of countries undergoing the European integration process, with a specific emphasis on Serbia and the Western Balkans.