Europe’s digital currency project has made some headway lately, with the eurozone central bank moving into the next phase. However, critics point to the persistent lack of clarity about the design and purpose of the digital euro after decades of delay in taking cryptocurrency as a benchmark.
The digital euro should feel like a kind of prepaid card
A week after the European Central Bank (ECB) decided to proceed with its plan to create a digital version of the euro, experts have raised concerns about its uncertain future. On July 14th, the Governing Council approved the start of the next “investigation phase” of the project. The phase will last 24 months in which key issues related to design and sales will be addressed.
But according to Hugo Coelho, former chief of staff of Eurogroup President Mario Centeno and partner at Forefront, “the result is not yet clear and it may not be there for a long time”. The Eurogroup is the informal but politically important meeting of finance ministers from the 19 EU member states that have adopted the common currency. Speaking to Euractiv, Coelho said:
At the moment the digital euro remains blatantly undefined … it could very well be that the first version of the digital euro feels like a kind of prepaid card and hardly changes our everyday life, but it could gradually change.
So far it is known that the digital euro is supposed to represent euro banknotes and coins in electronic form. However, unlike today’s bank money, it is held directly in ECB accounts and not with commercial banks. The central bank intends to use it as an additional payment instrument, but has also stated that the aim is not to replace traditional cash.
ECB loses game against cryptocurrencies and stablecoins
By default, the digital euro should be more secure than the private banking system, notes Euractiv, as a commercial bank could go bankrupt, a distant but real possibility. “In the collective consciousness, the ECB is the ultimate guarantee,” Netinvestissement co-founder Karl Toussaint du Wast told the publication. In addition, the CBDC is expected to be free to use, with payments made through a card or smartphone application issued by the ECB.
At the beginning of the investigation phase, ECB President Christine Lagarde said last week that the “encouraging results” of the analyzes and experiments over the past nine months had prompted the central bank to “step up a gear and start digitization”. Euro project. “Toussaint du Wast described the move as” desperate and hopeless “and emphasized:
The ECB lost the game … the innovation and growth power of projects developed on blockchain, including cryptos, was 10 years ahead.
One of the main reasons for the digital euro project is the desire of the European Central Bank to keep currency sovereignty under control, and the ECB will not give in. In this situation, stablecoins backed by fiat currencies such as the US dollar and the euro are the “first enemy” of the digital euro, according to Toussaint du Wast.
The electronic incarnation of the euro will appear according to all indications, for example after the “Diem” coin from Facebook. Earlier this year, the ECB requested a veto right against the introduction of such stablecoins in the euro area, citing the need to maintain control over inflation and maintain the security of payments in the single currency area.
Do you think the digital euro can successfully compete with stablecoins and cryptocurrencies? Do share your thoughts in the comments section below.
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