European Central Bank (ECB) program emission Prototype The digital euro in 2023. In the next five years, Europe may have its own central bank digital currency (CBDC) up and running. However, there are still many questions surrounding the digital currency of the future. In what form can it be distributed? Is the ECB too late for the CBDC party, especially compared to other central banks like the People’s Republic of China? To address these and other problems, German Cointelegraph spoke With Jonas Gross, President of the Digital Euro Association (DEA) and panelist of the European Blockchain Observatory and Forum.
new digital cash
Gross said central bank money is less risky than digital cash issued by commercial banks. Commercial banks can always go bankrupt, but central banks cannot because in an emergency it can print money as needed. And, in times of crisis, at least in theory, one might want to move all digital currencies from private to central banks, which would mean the end of commercial banking.
There are two possible mechanisms to avoid this: either a cap on the amount of central bank monetary funds that citizens can hold, or a negative interest rate on CBDC funds above the specified limit.
“The digital euro is primarily about being a digital cash and a new form of payment, not a store of value. Central banks don’t want to take away business from banks.”
Gross said that if the digital euro does not have certain features such as complete anonymity, EU citizens will not adopt it.His team did a study show It is technically possible to make a digital euro as anonymous as cash. Gross insisted that it is also technically possible to allow digital euro payments to remain anonymous up to a certain threshold, say up to 10,000 euros, beyond which authentication might be required. “This could be a big plus for a digital euro, especially given the fact that cash is becoming less and less important,” Gross said.
“In extreme cases, cash may be rarely used decades from now, as is the case in China or Sweden now. And if we don’t have a digital euro that supports anonymous payments at least in part, then we won’t have any more in terms of payments. Privacy. Even if it seems counterintuitive, a digital euro could promote privacy if one were to implement such a system focused on anonymity.”
Gross believes that the biggest problem at the moment is that the ECB has not yet determined the goals and functions of the future digital euro. Last year, the ECB cooperated with the central banks of several member states, after testing Four design options for digital currency.The first is the digital euro on the core technology KSI blockchain used Via E-Government in Estonia.
The second option is the digital euro built TIPS is a European electronic payment system launched in 2018. The third possibility is a hybrid solution that lies between the blockchain and the traditional banking system. Finally, the fourth is a bearer note, which is a currency card that can be used for payments or hardware capable of processing offline payments without access to the internet.
Gross said these were only rough possibilities, and the ECB had not yet settled on a single design, as the scope of potential applications for a digital euro was not entirely clear.
possible geopolitical risk
Digital RMB and other projectsA Chinese CBDC could completely weaken the euro, especially if foreigners are also allowed to use it. Gross explained that digital currency could make it easier and cheaper to pay with the currency. During the Russian-Ukrainian War, International Payments and Currency Sanctions Issues Geopolitically important again.
“The Russian government has stated that Russian gas must now be paid in rubles,” Gross said. “Theoretically, the Chinese could also come up with the idea that the products we have to export, which are currently traded in dollars or euros, have to be paid in Chinese currency from now on, such as the digital yuan.”
China can strengthen its currency through digitization, which could cause the euro to lose some influence in the future. This is why the ECB should move faster on a digital euro and ultimately decide what it wants from a CBDC.
This is a shortened version of an interview with Jonas Gross.you can find the full version here (in Germany.)