A new report from the ECB looks at the risks that would arise if a digital euro were not introduced.
After a long lull, the issue of a European CBDC now seems to be developing a new dynamic. After the finance ministers of Germany and France had publicly spoken out in favor of a first pilot project for the digital euro, the “Annual report on the international role of the euro” according to the ECB. In it, the economists Massimo Ferrari and Arnaud Mehl dealt, among other things, with the risks that could arise if the introduction of a CBDC is neglected.
First of all, the analysts see a growing danger from currencies of “big tech companies” without mentioning the project of a particular social medium by name. If non-state providers begin to dominate international payments, this could endanger the stability of the financial system. In addition, the small number of service providers would make consumers and retailers more vulnerable, according to economists.
The introduction of an e-euro is all the more urgent in order to be able to compete better with private payment systems. Various features are required for this. This is what Ferrari and Mehl say:
Low transaction costs and bundling effects could increase the attractiveness for processing cross-border transactions – as a means of payment and as a unit for settling ongoing transactions.
Massimo Ferrari and Arnaud Mehl in the ECB report
Other important functions that the e-euro must fulfill include ensuring anonymity and an offline payment function. In addition, the currency could also gain global status if it were used, for example, in economically unstable countries.
First concept for e-euro
As became known last week, the digital euro already seems to be taking concrete shape behind closed doors. Accordingly, they now want to work on a simpler variant of the e-euro. It shouldn’t be called E-Euro, but “Digital Euro”. The blockchain technology, which had repeatedly been associated with the prestige project, did not play a role. Rather, build on the Italian real-time transfer system “TIPS”. However, this would have to be upgraded again for the digital euro.
In addition, there is an upper limit of 3,000 e-euros. To this end, options are currently being evaluated to counteract abuse. In addition, there is still no official confirmation. The ECB Council intends to discuss these key points in July.
EU plans digital wallet for documents
In addition to the considerations on the e-euro, the EU Commission wants to announce its digital wallet as soon as possible. According to the news agency Reuters it should be an app that citizens can use to digitally identify themselves across the EU. In addition, it should also be possible to store various documents such as driver’s licenses, medical prescriptions or proof of qualifications.
In addition, the wallet is compatible with existing digital identification systems. Use of the service is not mandatory.