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A possible digital euro?

Siatris Ioholo

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Jul 31, 2021
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Du'at
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A possible digital euro being considered by the European Central Bank could have several benefits, such as facilitating cross-border payments and providing a digital monetary anchor, said ECB Governing Council member Olli Rehn.

He explained that the investigation phase for the digital euro would be completed by October 2023 and then the ECB would decide when it would start developing the digital currency. The official outlined some of the possible benefits of the idea of introducing a central bank digital currency (CBDC), such as extending the availability of central bank money to include payments between individuals, not just transactions between banks.

''A digital euro would give people more choice over how they pay and make it easier to make payments in an increasingly digital economy,'' Rehn said. He added that the current limitations on private crypto-assets are ''structural'' because of their price volatility and vulnerability to cyber risks.

Major central banks have been studying the introduction of digital variants of their currencies for several years. The Bank of England has talked about a time horizon of several years and recently said a final decision has not been made. However, it is working on a general plan for the eventuality of a switch to the digital pound.

The Fed has a project under study on the same subject. A digital dollar could also be a response to the possibility that China, where the PBOC has already been testing a form of digital currency, could gain in global influence through freer circulation of the digital yuan.

CBDC (central bank digital currency) is a new form of electronic recording of currency holdings. Unlike the current 'electronic' money, 'visible' in a bank's online application or investment account, this currency will have a new technical structure, allowing a range of operations that are impossible or difficult to perform in the form currently used.

The ECB, which has seen the percentage of cash use in the eurozone fall in three years to 59% from 72%, is considering developing a contactless and QR code payment app. This would allow consumers to use it independently, but also allow banks to connect to their own platforms, so that users, if they wish, will be able to use banks' already familiar internet applications.

This interoperability bodes well for commercial banks, which would theoretically risk a diminished market presence while central banks would gain massive visibility - if CBDCs used a form of implementation similar to the current crypto implementation.

However, such a model would complicate the current functioning of the financial system, where the provision of credit to citizens and businesses is left to bank intermediaries. It would be a change, one can imagine, unpopular with banks, and one that central banking authorities apparently do not want. Still, some changes may occur, making life easier for digital currency users, but potentially raising issues of debate.

Source
 

Al Jilwah: Chapter IV

"It is my desire that all my followers unite in a bond of unity, lest those who are without prevail against them." - Satan

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