European digital currency projects have made some progress recently, and the Eurozone central bank has entered the next phase. However, critics point out that if cryptocurrencies are used as a benchmark, the design and purpose of the digital euro still lack clarity after a ten-year delay.
The digital euro “feels like a prepaid card”
A week after the European Central Bank (ECB) decided to continue its plan to create a digital version of the euro, experts expressed concern about its uncertain prospects. On July 14, the Council of the European Central Bank approved the launch of the next “investigative phase” of the project. This phase will last 24 months, during which key issues related to design and distribution should be resolved.
But according to Hugo Coelho, former chief of staff of Eurogroup President Mario Centeno and Forefront partner, “The result is not yet clear and it may not last long.” Eurogroup is the 19 common currency. An informal but politically important meeting of the finance ministers of EU member states. Coelho elaborated in an interview with Euractiv:
At present, the digital euro is still blatantly undefined… It is likely that the first version of the digital euro feels like some kind of prepaid card, which has little impact on our daily lives, but it may gradually change.
What is known so far is that the digital euro should represent euro banknotes and coins in electronic form. However, unlike today’s bank currency, it will be stored directly in an account issued by the European Central Bank, rather than a commercial bank. The central bank intends to use it as an additional payment tool, but also stated that replacing traditional cash is not the goal.
The European Central Bank loses to cryptocurrencies and stablecoins
Euractiv commented that by default, the digital euro should be more secure than the private sector banking system, because commercial banks may become insolvent, which is a remote but real possibility. “In the collective view, the European Central Bank is the ultimate guarantee,” Netinvestissement co-founder Karl Toussaint du Wast told the publication. More importantly, the use of CBDC is expected to be free, and payment can be made through a card issued by the European Central Bank or a smartphone application.
Commenting on the beginning of the investigation phase, European Central Bank President Christine Lagarde said last week that the “encouraging results” of the analysis and experiments conducted in the past nine months prompted the central bank to “decide to accelerate the pace and launch the digital euro project.” Toussaint du Wast described this move as “despair and despair” and emphasized:
The European Central Bank has lost the game…The innovation and growth capabilities of projects developed on the blockchain (including cryptocurrencies) have been leading the way for 10 years.
Euractiv pointed out that one of the main motivations behind the digital euro project is that the European Central Bank wants to control monetary sovereignty, and the European Central Bank will not admit failure. Toussaint du Wast stated that in this case, stablecoins backed by fiat currencies such as the U.S. dollar and the euro are the “number one enemy” of the digital euro.
There are indications that the electronic incarnation of the euro is likely to appear after Facebook’s “diem” coin. Earlier this year, the European Central Bank asked for the grant of veto power to launch such stablecoins in the Eurozone, citing the need to maintain control of inflation and maintain payment security in the single currency zone.
Do you think the digital euro can successfully compete with stablecoins and cryptocurrencies? Share your thoughts in the comments section below.
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