Europe is moving closer to establishing its own online euro following China's digital currency launch.

The People's Bank of China, the country's central bank, said at the Sibos Banking and Financial Conference on Monday that the use of its digital currency had so far exceeded $162 million in transactions. The country is currently leading the way in developing and implementing its digital currency, running pilot test programs to gauge its efficacy.

Central banks across the world are now exploring the idea.

The ECB said in a report it would have to move slowly to ensure that the proposed digital currency wouldn't have any adverse effects on "monetary policy and financial stability."

The ECB said risks that may come with the digital currency included the safety and efficiency of retail payments, cybersecurity attacks, legal issues, privacy and cross-border outflows.

"The move to introduce a digital currency in which users hold deposits directly with the central bank is quite a radical one, and there isn't much research done on the effects on the economy, especially the banking sector," cryptocurrency company Bitcoin Association of Hong Kong said in a statement.

Another risk of a sovereign digital currency is the possibility of the traditional banking system being overwhelmed as depositors change savings into the central bank-issued digital money. Commercial banks will need to coordinate with central banks to secure replacements for lost deposits - which could pressure a country's financial systems.

"Were this demand to increase their funding costs, banks might have to deleverage and decrease the supply of credit, thus preventing an optimal level of aggregate investment and consumption," the ECB said.