The European Central Bank will exert control over the currency, according to a report. The agency aims to make it clear that the Digital Euro would not be a crypto asset.
The European Central Bank (ECB) predicts that it would be possible to launch the project in mid-2021, starting with a research phase. It reported that it will assess the requirements of users and service providers while requesting the public to participate in a survey.
Among those who can participate in the consultation are citizens, companies, NGOs, trade, unions and academic organizations. The ECB asks them to rank the possible characteristics of a future digital currency in order of importance. It also invites them to describe the challenges that would prevent them from using the Digital Euro.
With these preliminary phases, they seek to identify at least a minimum viable product, capable of meeting the requirements that the agency described in the report in early October.
A document, entitled “Report on the Digital Euro”, assesses the impact of the issuance of a central bank digital currency (CBDC) in the Eurosystem. It explains the characteristics that the digital asset should have to be functional in the European Union.
The central bank would be directly responsible for the Digital Euro from the beginning, “offering it in digital form for the use of citizens and companies for their retail payments.” This property places the digital currency within the CBDC retail cash like classification.
Differences between the Digital Euro and Crypto Assets
During the announcement of the public consultation, the ECB establishes that the Digital Euro must have various specific features. These include ease of access, robustness, security, efficiency, and privacy, in addition to compliance with the law.
Among the potential benefits of the digital currency, the European Central Bank takes into account the rapid changes occurring in the retail payments sector. It considers that the Eurosystem should have the equipment to issue digital currencies in the future.
According to the report, the Digital Euro could serve to increase options, competition, and accessibility regarding other forms of digital payment, thus supporting financial inclusion.
The agency wants to make it clear that the Digital Euro will have nothing to do with crypto assets. It emphasizes that cryptocurrencies are different from the money that a central bank issues “because their prices are volatile, lacking an intrinsic value, without a reliable institution to back them.”
The ECB’s definition of crypto asset leaves aside considerations on the use of cryptography to issue the digital currency. If they take into account this tool, the Digital Euro would then be a crypto- asset.
The report makes no specific mention of cryptocurrency mining. However, it seems to make a comparison when highlighting that Europe’s digital currency “could represent an option to reduce the overall costs and the ecological footprint of some other existing payment systems.”
The agency expects the Digital Euro to have the same functions as the euro in general. They state that they want the central bank to ensure preserving the value of their money and safeguarding any form of digital euro.
In this way, the ECB aims to regulate the digital currency similarly to fiat currencies, as China plans to do with the Digital Yuan. It is not clear whether it would be subject to the customary depreciation of fiat money. Some measures that central banks take, such as the inorganic issuance of money that leads to the devaluation of currencies, sometimes contradict the idea of preserving value.
A deeper analysis could shed light on the future role of the Digital Euro as a tool to strengthen the monetary policy of the European Union. The agency will prioritize measures that counteract adverse effects on financial stability.
By Alexander Salazar
