How the Digital Euro Could Reshape Governance, Sustainability and Financial Stability

TABLE OF CONTENTS 1. Introduction 1.1 Background: Digitalization of Money and Financial Systems 1.2 Research Objectives and Research Questions 1.3 Methodology and Scope of Analysis 1.4 Academic and Practical Relevance 2. The Institutional Framework of Digital Money 2.1 Role of Central Banks in the Digital Era 2.2 European Central Bank: Mandate, Governance and Monetary Objectives 2.3 CBDCs in a Global Context (EU, China, US perspectives) 3. From Cash to Code: Drivers of Central Bank Digital Currencies 3.1 Decline of Cash and Payment System Transformation 3.2 Financial Inclusion, Efficiency and Cost Reduction 3.3 Technological Innovation and Systemic Resilience 3.4 Environmental Footprint of Payment Systems 4. The Digital Euro: Design, Architecture and Policy Choices 4.1 Possible Models of a Digital Euro (Retail vs Wholesale) 4.2 Two-Tier Banking Systems and Financial Intermediation 4.3 Privacy, Data Governance and Cybersecurity 4.4 Remuneration, Limits and Monetary Transmission 5. Corporate Governance Implications of the Digital Euro 5.1 Impact on Banks Business Models and Governance Structures 5.2 Central Bank Power, Accountability and Governance Risks 5.3 Digital Money and Market Discipline 5.4 Transparency vs Control: Governance Trade-offs 6. ESG and Sustainability Dimensions 6.1 Environmental Impact: Digital Euro vs Cryptocurrencies 6.2 Social Dimension: Financial Inclusion and Consumer Protection 6.3 Governance Dimension: Regulation, Oversight and Ethical Risks 6.4 Alignment with EU Sustainable Finance Framework 7. Digital Euro, AI and Data-Driven Economic Control 7.1 AI-Enabled Monetary Policy and Real-Time Data 7.2 Smart Compliance, AML and Financial Supervision 7.3 Risks of Algorithmic Governance and Technocratic Bias This makes the thesis future-oriented and distinctive. 8. Corporate Finance and Transfer Pricing Perspectives 8.1 Multinational Cash Management in a CBDC Environment 8.2 Transfer Pricing, Intragroup Payments and Traceability 8.3 Tax Transparency and Regulatory Arbitrage Risks 8.4 Implications for Global Value Chains 9. Risks, Criticisms and Policy Challenges 9.1 Financial Disintermediation and Bank Stability 9.2 Privacy Erosion and State Overreach 9.3 Cyber Risks and Systemic Vulnerabilities 9.4 Political Economy Concerns 10. Conclusions and Future Research 10.1 Summary of Findings 10.2 Policy Implications for Central Banks and Regulators 10.3 Implications for Corporations and Financial Managers 10.4 Directions for Future Research

Literature: Chapter 1 Introduction

1.1 Background: Digitalization of Money and Financial Systems

CORE

• Ashfaq, M., Rashedul, H., & Meron, J. (2023). Central Bank Digital Currencies and the Global Financial System
• Bech, M. L., & Garratt, R. (2017). Central bank cryptocurrencies. BIS Quarterly Review
• European Central Bank (2020). Report on a Digital Euro

ADDITIONAL

• Lagarde, C. (2020). Payments in a Digital World
• Mersch, Y. (2020). An ECB Digital Currency: A Fad?
• Russo, D. (ed.) (2021). Payments and Market Infrastructure Two Decades after the Start of the ECB

1.2 Research Objectives and Research Questions

CORE

• European Commission (2023). Proposal for a Regulation establishing the Digital Euro
• ECB (2023). Stocktake following the Investigation Phase

ADDITIONAL

• Atlantic Council (2023). CBDC Evolution in 2023

1.3 Methodology and Scope of Analysis

CORE

• ECB (20222025). Progress Reports on the Investigation and Preparation Phases
• BIS / CPMI (20202023). CBDC Design and Interoperability Reports

ADDITIONAL

• ECB Annexes (SPACE methodology; functional & non-functional requirements)

1.4 Academic and Practical Relevance

CORE

• Ashfaq et al. (2023)
• Bindseil, U., & Panetta, F. (2021). CBDC: Functional Scope, Pricing and Controls

ADDITIONAL

• King, B. (2018). Bank 4.0
• Blakstad, S., & Allen, R. (2018). FinTech Revolution

Chapter 2 The Institutional Framework of Digital Money

2.1 Role of Central Banks in the Digital Era

CORE

• BIS (2003). The Role of Central Bank Money in Payment Systems
• BIS et al. (2020). Foundational Principles and Core Features of CBDCs
• Ashfaq et al. (2023)

ADDITIONAL

• Panetta, F. (2018). 21st Century Cash

2.2 ECB: Mandate, Governance and Monetary Objectives

CORE

• TFEU, Article 128
• ECB Statute (Protocol No. 4)
• ECB (2023). Opinion CON/2023/34

ADDITIONAL

• CJEU (2021). Hessischer Rundfunk v Fischer
• Estrada Caamares (2024). Legal Tender Status

2.3 CBDCs in a Global Context (EU, China, US)

CORE

• BIS (2021). Third BIS Survey on CBDCs
• BIS / CPMI (20212023). Cross-Border Payments and Interoperability
• Ashfaq et al. (2023)

ADDITIONAL

• IMF (2021). Bahamas Article IV
• Central Bank of The Bahamas (20202021). Project Sand Dollar

Chapter 3 From Cash to Code: Drivers of CBDCs

3.1 Decline of Cash and Payment Transformation

CORE

• ECB (2024). SPACE 2024
• ECB (2024). Use of Cash by Companies
• ECB (2024). Acceptance of Payment Instruments

ADDITIONAL

• Panetta speeches (20202022)

3.2 Financial Inclusion, Efficiency and Cost Reduction

CORE

• ECB (2021). Public Consultation on the Digital Euro
• Blakstad & Allen (2018)

ADDITIONAL

• Hasan, Ashfaq & Shao (2021)
• Patil, Dwivedi & Rana (2017)

3.3 Technological Innovation and Systemic Resilience

CORE

• ECB (2023). Stocktake on Technological Options
• ECB (2022). Onboarding Package for Prototyping

ADDITIONAL

• BIS Innovation Hub (2023)

3.4 Environmental Footprint of Payment Systems

CORE

• ECB official sustainability positioning on payments

ADDITIONAL

• Comparative crypto energy literature (used sparingly)

Chapter 4 Digital Euro: Design, Architecture and Policy Choices

4.1 Retail vs Wholesale Models

CORE

• ECB (2023). High-Level Product Description
• Bindseil & Panetta (2021)

ADDITIONAL

• BIS (2022). System Design and Interoperability
• Banca dItalia (2021)

4.2 Two-Tier Banking and Intermediation

CORE

• Bindseil (2020). Tiered CBDC
• Panetta (2021). Evolution or Revolution?

ADDITIONAL

• Bindseil, Marrazzo & Sauer (2024)

4.3 Privacy, Data Governance and Cybersecurity

CORE

• GDPR (EU 2016/679)
• EU Regulation 2018/1725
• ECB (2023). Functional & Non-Functional Requirements

ADDITIONAL

• Grnewald (2022)
• ECB (2024). Multiple Accounts / Single Access Point

4.4 Remuneration, Limits and Monetary Transmission

CORE

• Bindseil & Panetta (2020). CBDC Remuneration
• ECB Monetary Policy Transmission Papers

ADDITIONAL

• ECB Progress Reports (20222025)

Chapter 5 Corporate Governance Implications

5.1 Impact on Banks Business Models

CORE

• Bindseil (2020)
• Panetta (20212022)

ADDITIONAL

• BIS financial stability commentary

5.2 Central Bank Power and Accountability

CORE

• ECB Opinion CON/2023/34
• European Commission (2023) proposal

ADDITIONAL

• ECB Legal Conference Papers

5.3 Digital Money and Market Discipline

CORE

• BIS / CPMI financial stability papers

ADDITIONAL

• Atlantic Council (2023)

5.4 Transparency vs Control

CORE

• GDPR
• ECB Consultation Results

ADDITIONAL

• ECB Civil Society Seminars

Chapter 6 ESG and Sustainability Dimensions

6.1 Environmental Impact

CORE

• ECB climate-related payment system analysis

ADDITIONAL

• Comparative crypto footprint studies

6.2 Social Dimension

CORE

• SPACE 2024
• EU Accessibility Act
• Payment Accounts Directive

ADDITIONAL

• Blakstad & Allen (2018)

6.3 Governance Dimension

CORE

• ECB Rulebook Development (v0.9)
• Commission proposal

ADDITIONAL

• MiCA Regulation (contextual)

6.4 Alignment with EU Sustainable Finance Framework

CORE

• EU Taxonomy / SFDR (if cited)

ADDITIONAL

• ECB sustainable finance integration papers

Chapter 7 Digital Euro, AI and Data-Driven Economic Control

7.1 AI-Enabled Monetary Policy

CORE

• Lane (2025). Autonomy of the Monetary System
• ECB Preparation Phase Work Packages

ADDITIONAL

• Azar & Haddad (2021)

7.2 Smart Compliance, AML and Supervision

CORE

• EU AML Legislative Package (2021)

ADDITIONAL

• ECB technical notes on monitoring architecture

7.3 Algorithmic Governance Risks

CORE

• EU governance and data protection framework

ADDITIONAL

• Azar & Haddad (2021)

Chapter 8 Corporate Finance and Transfer Pricing

8.1 Multinational Cash Management

CORE

• Desai, Foley & Hines (2004; 2006)
• Gertner, Scharfstein & Stein (1994)
• OECD (2020). Digital Economy & BEPS

ADDITIONAL

• BIS cross-border payments reports

8.2 Transfer Pricing and Intragroup Payments

CORE

• OECD (2022). Transfer Pricing Guidelines
• OECD (2020). Guidance on Financial Transactions
• Eden (2012)

ADDITIONAL

• Big-4 TP documentation studies

8.3 Tax Transparency and Arbitrage

CORE

• OECD BEPS Pillar Two
• Zucman (2015)
• Johannesen & Zucman (2014)

ADDITIONAL

• EU ATAD

8.4 Global Value Chains

CORE

• Antrs & Chor (2013)
• Baldwin (2016)
• UNCTAD (2021)

ADDITIONAL

• WTO digital trade facilitation reports

Chapter 9 Risks, Criticisms and Policy Challenges

9.1 Financial Disintermediation

CORE

• Bindseil (2020)
• Panetta (20212022)

ADDITIONAL

• BIS CBDC surveys

9.2 Privacy and State Overreach

CORE

• GDPR
• ECB Consultation Outcomes

ADDITIONAL

• ECB Civil Society Seminars

9.3 Cyber Risks

CORE

• ECB technical requirements
• BIS interoperability papers

ADDITIONAL

• ECB prototyping documentation

9.4 Political Economy Concerns

CORE

• European Commission proposal
• ECB opinions

ADDITIONAL

• Atlantic Council (2023)

Chapter 10 Conclusions and Future Research

No new literature synthesis only.

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