The digital euro from the European Central Bank is slowly taking shape. BTC-ECHO has obtained a leaked draft law from the European Commission that reveals more details. Here are the insights. The ECB has been working on a digital central bank currency (CBDC) for some time now. Although there are still many uncertainties, as we have previously reported, fresh information has emerged from the European Commission. BTC-ECHO has gained access to a leaked draft law that provides further information on the design of the digital euro. It is currently unclear whether the EU Commission will ultimately implement this draft as it is.
The Digital Euro as Cash Replacement The ECB's digital euro aims to become a widely used means of payment throughout the Eurozone, offering an alternative to cash. It will be accessible to everyone, with a general obligation to accept it, except for certain exceptions. National central banks can be involved in its issuance. Separate agreements between countries will be necessary for use outside the currency area.
The ECB reserves the right to develop its own app for the digital euro, although private corporate solutions may also be used. Additionally, the central bank may charge fees for CBDC transactions.
ECB: Limitations and Functions As previously announced by ECB representatives, the digital euro will not be programmable. This seems to be an attempt to address concerns among the public. After all, the central bank could potentially program an expiration date into the digital euro, as well as certain issuance restrictions. Thus, the digital euro is likely to differ from China's ambitions, at least for now.
The ECB also seeks to address concerns from banks by reducing the attractiveness of the digital euro as an alternative to bank deposits. There is a fear that bank customers may withdraw their deposits and transfer them to the more secure central bank alternative. To mitigate this risk, maximum limits are being discussed. The amount of €3,000 has been suggested as a potential limit for individuals to hold in the form of the digital euro. The EU Commission also emphasizes the involvement of banks in the management of digital euro accounts.
Euro on the Blockchain? While the use of Distributed Ledger Technology (DLT) is considered, it does not necessarily mean a public blockchain will be employed. A public blockchain is generally excluded, as it contradicts a central bank's control requirements.
Money - The Next 10 Years Nevertheless, from a technical perspective, the digital euro may function as tokens, without relying on the decentralized infrastructure seen in Bitcoin and similar cryptocurrencies.
Conclusion We have extensively covered the potential risks of a CBDC, including the danger of increased centralization in money creation and heightened liquidity risks for the banking sector. Therefore, it is crucial that the banking sector takes decisive action to offer private alternatives to the ECB's digital euro. Banks and savings institutions should accelerate the development of tokenized fiat money and stablecoins. The current approaches are not comprehensive enough.
While we may not face a situation similar to China's, it is crucial for the economy and civil society to have maximum influence over the design phase of the digital euro. After all, digital central bank money reflects societal and political realities.
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