No, your euro bills and coins aren’t going to disappear — keep your cash. But the European Central Bank, backed up by the Bundesbank, is working to put your euros online so that we can do more with them.
The FinTech Council at the German Ministry of Finance has published a position paper on the future digital, and especially programmable forms of money on Thursday. The ECB is concerned that Facebook’s Libra , a stablecoin pegged to a basked of financial instruments, will take over the role of international digital currency.
But the ECB also believes that a programmable euro would enable new, cutting-edge business models: “Industry 4.0 (the digital transformation of manufacturing/production and related industries and value creation processes).and Logistics 4.0 (the networking and integration of logistics processes within and outside of trading companies and production facilities) can be supported through the programmable Euro and can be raised to a completely new level through the connection of machines.”
And there are clear ways in which a programmable euro would enable greater efficiency in a number of business areas, according to the paper. “Above all, these are: increasing efficiency in cross-border payment transactions, automation, integration of service and consideration and and enabling micro payments.
A legal framework, however, must be established before the programmable euro can hit the airwaves, the paper warns. “A uniform, harmonious regulatory framework must be created at the European level. The European Commission should act urgently. A roadmap for the entire EU would be desirable. This applies to a uniform EU-wide regulatory classification of private stablecoins, as well as the treatment of crypto assets or their safekeeping. If this does not succeed, regulatory arbitrage effects between individual EU member states can be expected.”
In fact, a bill to create cryptocurrencies as a separate asset class, to regulate it as a financial instrument and to establish the operations of stablecoins, will be debated in September by both the European Commission and in EU parliamentary committee. This follows a year-long consultation that the Commission has led.
The problem here is that the meaningfulness and necessity of the programmable Euro has not yet been sufficiently understood at the supranational level, the paper points out. “There needs to be a focus on added value for cross-border payments (i.e. reference to export and import activities), securities transactions and use in the growing machine economy (i.e. Industry 4.0, autonomous driving, logistics, Internet of Things).
A number of central banks around the world, notably Sweden and China, are already building blockchains and preparing to release digital currency. “It has to be stressed that the Chinese central bank is probably two to three years ahead of Europe with the launch of its digital currency.
According to a survey by the Bank for International Settlements (BI), 10 per cent of global central banks plan to issue such a digital central bank currency in the next 1–3 years.
The plan, for now, is for the ECB to introduce the digital Euro in a two-stage process. First, the digital euro would be developed on the blockchain and then used only among financial institutions. This would give developers time to work out the kinks. After that, companies and individuals would be able to start using it.
Clearly, Europe should not be left behind in this race, as the ramifications for the national (and European) economies are considerable, as the paper notes.
