EU to start with a "Digital Euro" within 5 years

[tikker]

Not sure if it completely fits TN. Happy to see it moved elsewhere if not.

 

Summary

The European Central Bank is joining the digital currency party by developing a digital version of the Euro. Two weeks ago it was reported that it aims to start issueing it within the next five years. It will coexist along the Euro we're used to, is not a cryptocurrency and is only intended to become an easy and secure method for online payments.

 

"The euro belongs to Europeans and we are its guardian. We should be prepared to issue a digital euro, should the need arise." -- the ECB

 

Quotes

Quote

During an interview at a Reuters conference, the ECB’s President, Christine Lagarde, noted that bitcoin had some “funny business” and asked for a global layer of regulation for bitcoin.

This was a bit of an off-hand remark, but also comes at the same time as the ECB releasing the results of the end of public consultation around the digital euro, as well as a statement from Christine Lagarde that the digital euro was likely to come about in the next five years.

...
Worries about money laundering likely mean, of course, that even though the public supports privacy, the ECB is not going to be strongly tied to that.

https://www.forbes.com/sites/rogerhuang/2021/01/14/ecb-pushes-digital-euro-wants-to-globally-regulate-bitcoins-funny-business/

 

Quote

What are other benefits of a digital euro?

A digital euro would combine the efficiency of a digital payment instrument with the safety of central bank money. It would help to deal with situations in which people no longer prefer cash, and it would avoid dependence on digital means of payment issued and controlled from outside the euro area, which might undermine financial stability and monetary sovereignty. The protection of privacy would be a key priority, so that the digital euro can help maintain trust in payments in the digital age.

https://www.ecb.europa.eu/euro/digital_euro/html/index.en.html

 

Quote

Privacy was a topic that had mixed messages in the paper. A CBDC was portrayed as a better privacy alternative than private solutions and privacy was stated to be a desirable feature. There is also some suggestion of different degrees of privacy.

 

However, here’s what it says about the legal aspect. “Regulations do not allow anonymity in electronic payments and the digital euro must in principle comply with such regulations (Requirement 10). Anonymity may have to be ruled out, not only because of legal obligations related to money laundering and terrorist financing, but also in order to limit the scope of users of the digital euro when necessary – for example, to exclude some non-euro area users and prevent excessive capital flows.”

One of the conundrums is a lack of privacy might conflict with one of the five principles that were outlined in the paper: that end-users should trust a CBDC.

https://www.ledgerinsights.com/eurosystem-digital-euro-currency-cbdc-project-by-mid-2021/

 

Quote

A digital euro would be an electronic form of central-bank money, which proponents say will allow for faster and cheaper payments as they cut out the administration and the high costs needed in traditional banking.

...

A digital euro may also outflank cryptocurrencies like Bitcoin, for which Lagarde on Wednesday called for stricter regulation.

"For those who thought (Bitcoin) might turn into a currency, I'm terribly sorry but this is a highly speculative asset, which has conducted some funny business and... totally reprehensible money-laundering activity."

Regulation "needs to be agreed at a global level because if there is an escape that escape will be used," she said.

https://techxplore.com/news/2021-01-digital-euro-years-lagarde.html

 

Quote

“We will offer safe money, not financial services. Offering financial services is the role of commercial banks. It would be crazy for us to do it. People already decide today whether to pay with cash, with various cards or online. In the future they will have an extra digital option, if they so wish ”.

 

“ Our main motivation is the digitization of the financial sector. With this in mind, a digital euro would offer a simple, secure and reliable means of payment that would be cost-free, ensure data protection and be accepted throughout the eurozone "

https://translate.google.com/translate?sl=it&tl=en&u=https://www.wallstreetitalia.com/euro-digitale-al-via-entro-cinque-anni-tetto-massimo-di-3-mila-euro/

 

My thoughts

Governments are scared of crypto, they just want to (re)acquire and retain control and are planning to do so by introducing their own crypto-but-it's-not-crypto currency. They even mention blockchain as a strategy being investigated. I'm happy to be convinced otherwise, but I don't see an advantage to this currency with or without crypto. Apparently the money in our banks is not a digital Euro? This feels like something that could/should have been a "backend fix" to update the banking infrastructure to modern standards. As for ease of use I think this will just confuse people in the end or at least be not user friendly, especially with the way they are describing it. According to WallstreetItalia it seems to be intended only for payments:

Quote

In concrete terms, European citizens will be able to have an account in digital euros directly with the European central bank but with a deposit limit that could be set - explained Panetta - for example at 3 thousand euros , which is already a threshold higher than the cash needs of most people. Any sums exceeding this threshold could be subject to passive interest rates, making them unattractive compared to the offers of commercial banks. All these aspects, however, are still under discussion.

So to use this "Digital Euro" I would first have to deposit it into an electronic wallet/account at the ECB and then pay from there. Simultaneously I'm not supposed to store funds there long term or use it for things other than payments, as that would compete with existing banks.

 

Secondly there is the point of privacy. I'm not up to spec with how much privacy we really have with private banks at the moment, I'm guessing very little, but this digital euro seems to the usual joke in that regard. Excessive capital flow will already trigger the bank to contact you or authorities. They try to make privacy a selling point, but based on the Ledger Insights article they have no way to actually offer privacy and I see little reason to trust them over a local bank.

 

They attempt to explain why a digital euro would be better than crypto:

Quote

Q4. Why would a digital euro be better than stablecoins and crypto-assets?

A digital euro would be central bank money, and therefore risk-free and always backed by a central bank. Central banks are the only institutions that guarantee the value of money, whether in physical or digital form.

Furthermore, a digital euro would be designed with due consideration of citizens’ privacy. By contrast, the stability and reliability of stablecoins and crypto-assets depend on their respective designs, business models and individual frameworks to handle privacy and personal data.

Privacy is basically out the window already and stablecoins are already made to track the dollar or whatever. Won't the digital euro be just a glorified stablecoin? Tether is already considered shady as people are mostly sure they don't have the actual fiat to back their supply. What will back the digital Euro, dollar, whatever? Again I see no difference between this digital money and my bank account telling me I have 5 currency units available.

 

Finally, the digital Euro offers little to no privacy (although the same can be argued for a number of crypto), because regulations don't allow for that, it's all centralised and they need to maintain the ability to exercise control over your assets or account. In other words exactly what the crypto sphere doesn't want in a currency. Cryptoenthusiasts already dislike coins where the developer has/controls the majority of coins. Why would they want the government to be that?

 

I realise I maybe compared it to crypto too much, but I can't help but see the overlap.

 

Sources

Official page: https://www.ecb.europa.eu/euro/digital_euro/html/index.en.html

https://www.wallstreetitalia.com/euro-digitale-al-via-entro-cinque-anni-tetto-massimo-di-3-mila-euro/

https://www.ledgerinsights.com/eurosystem-digital-euro-currency-cbdc-project-by-mid-2021/

https://techxplore.com/news/2021-01-digital-euro-years-lagarde.html

https://www.forbes.com/sites/rogerhuang/2021/01/14/ecb-pushes-digital-euro-wants-to-globally-regulate-bitcoins-funny-business/

 

[SupaKomputa]

Yeah, i don't understand why governments want to adopt this concept, isn't the money in our banks already "digital".

I can just swipe my debit card and boom, money digitally transferred.

ewallet is also a form of digital money, and it has been predominant mode of cashless transaction in many asia countries.

[porina]

I'm also struggling to see the point in this "digital euro". What advantage does it offer, or problem solved that can't be met with existing means? Existing banks and credit cards already serve a large part of that, and there are some loadable cards for those who don't want to tie to a bank.

 

As a cash alternative, the cost to implement another parallel infrastructure on top of that would be massive.

[Spindel]

11 minutes ago, SupaKomputa said:

Yeah, i don't understand why governments want to adopt this concept, isn't the money in our banks already "digital".

I can just swipe my debit card and boom, money digitally transferred.

ewallet is also a form of digital money, and it has been predominant mode of cashless transaction in many asia countries.

Fully agree with you, I don't see the point. 

 

In my country we also have a service called Swish that basically means you can instantly send small amounts of money between peoples bank accounts, with a smart phone, or pay for smaller (cheap) things in stores. 

 

I can count on one hand how many times I've had cash the last 20 years, I don't miss cash everything is on card or digital for me. Over here even a lot of places has stopped accepting cash as a payment method. I don't see a need for a "digital" currency to reach a cashless life.

 

Main users of cash here are: Turists, old people, immigrants (1st generation) and criminals. 

[Kroon]

23 minutes ago, Spindel said:

In my country we also have a service called Swish that basically means you can instantly send small amounts of money between peoples bank accounts, with a smart phone, or pay for smaller (cheap) things in stores. 

 

Yes, we in Sweden have Swish and at least Denmark and Germany have similar systems.  BUT they only work in the specific country.  Digital Euro are not designed to compete with any other currency simply make a homogen system for whole Europe.  A system that you can use online, in physical stores and between two persons (As you can do with swish).

 

If anything the Digital Euro will compete with pay services like Samsung and Apple have.

[ravenshrike]

44 minutes ago, porina said:

I'm also struggling to see the point in this "digital euro". What advantage does it offer, or problem solved that can't be met with existing means? Existing banks and credit cards already serve a large part of that, and there are some loadable cards for those who don't want to tie to a bank.

 

As a cash alternative, the cost to implement another parallel infrastructure on top of that would be massive.

It's part of the attempt to do away with cash entirely. The government wants records of any and all transactions you are party to.

[TetraSky]

Ah yes... digital money... The same thing I've been using nearly exclusively for the past 15+ years...

Anyone who pays anything with a credit card or debit card, is technically already using "digital money".

It's not like the banks are literally taking piles of money and shipping it to whoever you've made a transaction with... It's all digital, from one account to the other.

 

So yeah, like others, I don't see the point of this. Seems like something that would just confuse people. Though I am probably missing the obvious difference, it just seems pointless to me and "same shit, new coat of paint" ?

[HanZie82]

Where can i vote against this, so they stop wasting money on yet another form of money.
Why add to what we already have and is working fine. There's other options to make life easier. This aint it...

[tikker]

59 minutes ago, Kroon said:

If anything the Digital Euro will compete with pay services like Samsung and Apple have.

Interesting angle. I hadn't considered that yet.

33 minutes ago, TetraSky said:

Ah yes... digital money... The same thing I've been using nearly exclusively for the past 15+ years...

Anyone who pays anything with a credit card or debit card, is technically already using "digital money".

It's not like the banks are literally taking piles of money and shipping it to whoever you've made a transaction with... It's all digital, from one account to the other.

 

So yeah, like others, I don't see the point of this. Seems like something that would just confuse people.

Nah you've been using virtual money without paper backing your bank account. This will be digital money, where it's backed by the government's word!

 

It's like they want to compete with the Euro with the Euro. The thing that confuses me the most is this:

Quote

Q2. What would the digital euro look like?

A digital euro would look like most other contemporary private payment solutions, so there would not be much difference in terms of appearance. However, it would be issued by a central bank, i.e. a public authority. That means that the digital euro would serve the needs of the population at large.

It reads as if they're implying there are "private payment solutions" that do not use fiat or print unregulated Euros. I'm not aware of any besides crypto (which in the end still needs to be bought with fiat, so nothing's really appearing out of thin air besides the coin itself), so again to me it seems to be an elaborate way to try and fight crypto without outright banning it. They literally are the public authority that's issueing the Euro already. All payment services that I'm aware of (Paypal, Apple Pay etc.) already charge either your bank account or credit card after you pay with them.

[BuckGup]

I think everyone here is confused. Its not the fact that it's digital money it's that it's replacing the current ledger with one based on the blockchain which is an insane upgrade. Russia did the same with Ethereum. That said I think crypto has no business in the government as they ruin it by imposing limits, rules, and laws. 

[wanderingfool2]

2 hours ago, porina said:

I'm also struggling to see the point in this "digital euro". What advantage does it offer, or problem solved that can't be met with existing means? Existing banks and credit cards already serve a large part of that, and there are some loadable cards for those who don't want to tie to a bank.

 

As a cash alternative, the cost to implement another parallel infrastructure on top of that would be massive.

@SupaKomputa It is a bit more subtle.  At any time, a bank could go bankrupt and your money would be gone.  It isn't real money, only virtual money.

 

The other consideration is transaction fees.  There are still some places that charge for debit card transactions, there is the chance of overdraft as well, and more importantly retailers are hit with huge transaction fees.  There are some stores that actually raise their prices because the margins are so low and transaction fees are so much they can't operate at a profit without increased costs to the consumers.  In the end if instead of cash it was digital cash (without fees), it could potentially be highly beneficial to smaller businesses and thus consumers.

 

e.g. https://www.cfib-fcei.ca/sites/default/files/pdf/5513.pdf

Mastercard 1.75% per transaction (2.71% premium card)

[suicidalfranco]

3 hours ago, tikker said:

[...] safety of central bank money [...]

 

In the end: Just more ways to control the pleb

[porina]

15 minutes ago, wanderingfool2 said:

At any time, a bank could go bankrupt and your money would be gone.  It isn't real money, only virtual money.

Things can and will be different around the world. Funds held in the UK by a regulated retail bank (one a normal individual uses for day to day activities) are protected by the government. If my bank disappears overnight, I'd get that money back from the government.

 

15 minutes ago, wanderingfool2 said:

The other consideration is transaction fees.

Fair point, but a new "digital cash" system will still have costs to operate it. Someone will have to pay those costs. Are those fees better when hidden in general taxation? I guess you could similarly argue that physical cash also comes at a cost to produce, transport, and replace when it is physically worn out. But the transaction cost of physical cash is much closer to zero.

[tikker]

37 minutes ago, BuckGup said:

I think everyone here is confused. Its not the fact that it's digital money it's that it's replacing the current ledger with one based on the blockchain which is an insane upgrade. Russia did the same with Ethereum. That said I think crypto has no business in the government as they ruin it by imposing limits, rules, and laws. 

I can see the benefits of that, and that is why I saw it as more of a "backend upgrade" for lack of better terms. In the document detailing it the describe bank accounts, payment services, payment cards etc. In my eyes they make it seem like its  own separate thing, yet not.

[Kroon]

2 minutes ago, porina said:

I guess you could similarly argue that physical cash also comes at a cost to produce, transport, and replace when it is physically worn out. But the transaction cost of physical cash is much closer to zero.

 

Actually; physical currency are extremely expensive for the government.  Digital one would be much cheaper.

[Thaldor]

If I read between the lines correctly, this might be actually extremely good thing. PayPal but without fees and completely backed and operated by governments so, even less fees, better stability (they can't just say "fuck this" and march out with peoples moneys like any private corporation could and many kind of have done because in wider term store-credits and gift cards are your money stored in the store and first thing to happen in bankruptcy is that any store-credits and gift cards are nullified) and you probably don't want to start messing with them (I have seen people who don't give two fucks about PayPal disputes because they have used personal accounts and not business accounts and already fucked away with the moneys, you don't just fuck away from bank and I would guess ECB will require quite high levels of identifications and as it's whole different "currency" controlled by the ECB, good luck trying to cash out after scamming people with it).

 

This probably also would have the two huge problems of cryptos solved. Firstly, they don't need to raise the difficulty of the hashes constantly and completely creating the problem of impossible hash, as in what will happen to crypto transactions that are handled and proofed by the hashes that miners crunch when mining becomes unprofitable as the hashes are too hard for the HW to solve even in large farms in reasonable times? Most likely the crypto becomes worthless because without creating new way to do transactions, you cannot use it and with cryptos, you cannot even burn it to start a fire to boil some water. Second part is the trust, the best example is the Bitcoin, with it people are quite a lot trusting some maybe Japanese maybe not guy(s) who no one is that sure even exists, that his algorithm just works and he never crashes the BTC by selling his probably 1.1 million BTCs (gained when developing and testing the system) all at once (hard to say would it crash the whole BTC but at least some middlemen companies and brokers could be going down because that is a ton of money moving).

[SupaKomputa]

Just now, BuckGup said:

I think everyone here is confused. Its not the fact that it's digital money it's that it's replacing the current ledger with one based on the blockchain which is an insane upgrade. Russia did the same with Ethereum. That said I think crypto has no business in the government as they ruin it by imposing limits, rules, and laws. 

 

Just now, wanderingfool2 said:

@SupaKomputa It is a bit more subtle.  At any time, a bank could go bankrupt and your money would be gone.  It isn't real money, only virtual money.

 

The other consideration is transaction fees.  There are still some places that charge for debit card transactions, there is the chance of overdraft as well, and more importantly retailers are hit with huge transaction fees.  There are some stores that actually raise their prices because the margins are so low and transaction fees are so much they can't operate at a profit without increased costs to the consumers.  In the end if instead of cash it was digital cash (without fees), it could potentially be highly beneficial to smaller businesses and thus consumers.

 

e.g. https://www.cfib-fcei.ca/sites/default/files/pdf/5513.pdf

Mastercard 1.75% per transaction (2.71% premium card)

Yes i only touched the surface, after reading it through, i can see why they wanna make use of the blockchain technology. It's more of a backend upgrade from my perspective. If anyone can have digital money, and the data is backup by the government, would this be the end of banking / visa / mastercard as we know of? And who will run those blockchain servers?

[Heliian]

3 hours ago, Spindel said:

Fully agree with you, I don't see the point. 

 

In my country we also have a service called Swish that basically means you can instantly send small amounts of money between peoples bank accounts, with a smart phone, or pay for smaller (cheap) things in stores. 

 

I can count on one hand how many times I've had cash the last 20 years, I don't miss cash everything is on card or digital for me. Over here even a lot of places has stopped accepting cash as a payment method. I don't see a need for a "digital" currency to reach a cashless life.

 

Main users of cash here are: Turists, old people, immigrants (1st generation) and criminals. 

Where are you?  Cash is accepted essentially everywhere and is even law in some countries that they must accept it.

 

You are biased. 

[Kisai]

4 hours ago, tikker said:

 

 

My thoughts

Governments are scared of crypto, they just want to (re)acquire and retain control and are planning to do so by introducing their own crypto-but-it's-not-crypto currency. They even mention blockchain as a strategy being investigated. I'm happy to be convinced otherwise, but I don't see an advantage to this currency with or without crypto. Apparently the money in our banks is not a digital Euro?

 

Well of course they are, crypto is eventually going to outstrip productive energy use. The only way they're going to solve that is to ban all cryptocoins in favor of their own system.

 

Canada has been doing the same. It's went nowhere and was sold to the private sector.

 

Ultimately the problem with digital currency is that it doesn't always work, where cash does. The problem with cryptocoins is that it's eventually all destroyed as wallets are lost, and all that energy input is always destroyed in both the mining and transaction process. The amount of energy to change two values in two computers is miniscule compared to the amount needed to do blockchain with a gigantic ledger.

 

Like we're going to look back in 20 years on cryptocoins and swear up and down at everyone who wasted energy on it when that energy could have been used for productive uses, or that computing power used for medical research.

 

[Spindel]

4 minutes ago, Heliian said:

Where are you?  Cash is accepted essentially everywhere and is even law in some countries that they must accept it.

 

You are biased. 

Sweden.

 

A lot of places do not accept cash.

 

EDIT:// there are aome other swedes on this forum and they can confirm

[BuckGup]

1 hour ago, SupaKomputa said:

 

Yes i only touched the surface, after reading it through, i can see why they wanna make use of the blockchain technology. It's more of a backend upgrade from my perspective. If anyone can have digital money, and the data is backup by the government, would this be the end of banking / visa / mastercard as we know of? And who will run those blockchain servers?

Etheruem fits the bill as it was made to be a generic blockchain backed publicly. It will be the end to VISA and other services but not anytime soon. Etheruem can support 6 transactions/second but to replace VISA or financial institutions like wallstreet it would need to handle thousands of transactions per second, which they are working hard on to implement.

[Heliian]

4 minutes ago, Spindel said:

Sweden.

 

A lot of places do not accept cash.

 

EDIT:// there are aome other swedes on this forum and they can confirm

Ah yes, Sweden.  Denmark's neighbour.  Stop trying to be so progressive. 

 

They still accepted cash a couple years ago. 

[wanderingfool2]

1 hour ago, porina said:

Fair point, but a new "digital cash" system will still have costs to operate it. Someone will have to pay those costs. Are those fees better when hidden in general taxation? I guess you could similarly argue that physical cash also comes at a cost to produce, transport, and replace when it is physically worn out. But the transaction cost of physical cash is much closer to zero.

Yes, it is a slightly valid point in terms of operating costs.  You are correct though in that I would argue in terms of replacement of currency as a bill costs 7.7 cents for $1/$2 bills and about 15 cents for higher values. https://www.federalreserve.gov/faqs/currency_12771.htm

With spending of $877 million each year, that could be spent on infrastructure ($2.67 per person cost per year or 0.7 cents/person/day).  It really becomes what's more initial cost or operating cost....are there enough transactions to make the cost higher...but that also just speaks in terms of budget costs.  There is the added risk of hacks, but the added benefit of catching crimes like money laundering, less forgeries (which impacts businesses more).

 

Overall, I think a digital currency will cost the government more money to implement and keep running as there will still be the physical currencies as well.  I don't think that we are necessarily ready for this in society yet, but I do think it could be a great idea.  Less control of cash-flow by credit card's / paypal, so they can't dictate the kind of services that are provided.  There are certain industries that would thrive in a digital Euro market, as they don't have to resort to like 10% fees (as they have to go through a multi-stage payment provider)

[tikker]

41 minutes ago, Kisai said:

Well of course they are, crypto is eventually going to outstrip productive energy use. The only way they're going to solve that is to ban all cryptocoins in favor of their own system.

 

Canada has been doing the same. It's went nowhere and was sold to the private sector.

 

Ultimately the problem with digital currency is that it doesn't always work, where cash does. The problem with cryptocoins is that it's eventually all destroyed as wallets are lost, and all that energy input is always destroyed in both the mining and transaction process. The amount of energy to change two values in two computers is miniscule compared to the amount needed to do blockchain with a gigantic ledger.

 

Like we're going to look back in 20 years on cryptocoins and swear up and down at everyone who wasted energy on it when that energy could have been used for productive uses, or that computing power used for medical research.

 

Fully agree that the mineable coins and likely mainly BTC and ETH for now pose a big issue regarding energy use. Nano is already a lot more efficient, but I also see the most future for coins that are or will be proof of stake.

[Kroon]

1 hour ago, Heliian said:

Ah yes, Sweden.  Denmark's neighbour.  Stop trying to be so progressive. 

 

They still accepted cash a couple years ago. 

 

There is a lot of places here in Sweden that do accept cash.  Even places like flea markets and trutstands on the town square don't take cash. But even some shops, number of places that accepts cash are decreasing fast!  It's simply to expensive for buissnis owners handle cash, by removing cash you also remove risk of counterfeit, robbery/theft (employees included), etc etc.  Even sales via Blocket (Similar to craigslist) are Swish more or less a requirement. 

 

Swish is simple, you get a phone number from the seller/shopkeeper that you enter in the app and then you just enter how much you are going to pay, few security steps later money are removed from your bank account and few seconds after that the receiver get a message that you have paid. No cash needed. 

 

I'm born in Denmark and still have family there and I know some banks have similar system there but not as commonly used.