The Bank of Spain would issue a public digital currency pegged to the value of the euro. They say that such a crypto asset could provide “financial stability” and facilitate financial inclusion.
The Spanish Socialist Workers Party (PSOE), through current president Pedro Sánchez, proposes that the Bank of Spain create a public cryptocurrency. In recent days, they presented the proposal to the Congress of Deputies for approval.
With this non-law proposal, the PSOE promotes the evaluation of the feasibility of a central bank digital currency (CBDC). That cryptocurrency pegged to the price of the euro would be the first of its kind in Europe.
The Bahamas Islands already have the sand dollar, available since 2020, and China also has a prominent CBDC project. Even the European Central Bank’s project seeks to implement the digital euro as the single currency in the Eurozone. According to international studies, the Bahamas’ cryptocurrency is the most advanced in the world, especially since it is available to the public.
One of the reasons for such a request is the “financial stability” that this CBDC could provide, “according to the authors of the project. Furthermore, this would lead to “the recovery of the character of money as a public good under democratic control.”
There are other fundamentals, such as the offer of a public alternative to “the rise of new digital forms of payment.” The project states that many of these payment methods escape banking regulation. Therefore, this would facilitate the financial inclusion of certain social sectors that do not have this service. Furthermore, this would represent a solution to “the decline in the use of cash.”
Spanish Legislators Fear the Anonymity of Private Cryptocurrencies
According to Spanish legislators, this public cryptocurrency differs from private ones like Bitcoin (BTC). They especially highlight the “high price volatility” of the latter and “their significant environmental impact.”
The proponents follow a discursive line that assumes that cryptocurrency mining harms the environment. However, some research on this sector states that mining promotes the use of renewable energy.
They add the “problem” of “the possibility of anonymity that these cryptocurrencies offer since they facilitate illicit activities and tax evasion.” In this regard, CBDCs foresee anonymity that decreases as the amounts of transactions increase. It is important to remember that “Bitcoin is not anonymous but pseudonymous.”
The Bank of Spain Studies the Creation of Its CBDC
Setting aside the parliament’s initiative, the Central Bank had already announced its interest in official digital currencies in May. The most important financial institution in Spain published an analysis on the benefits of this type of currency. Among them, it included its efficiency, transparency, and greater traceability of transactions.
Other Spanish state agencies have shown their interest in adopting blockchain technology to streamline their tasks. For example, the Ministry of Economy is working on a new method for processing stock transactions through blockchain technology. That would reduce the amount of time required to do the transactions and the fees to the intermediaries in that activity.
By Alexander Salazar
