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

[Bombastinator]

7 hours ago, tikker said:

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

 

 

 

 

 

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:

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:

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/

 

The follow up question would be WHY might they be “scared” of crypto?  The question is not answered.  The implication seems to be “because crypto weakens government control and is just better” but the other side of that one is “because crypto has serious scam problems and was never a hard currency” it could even be argued that crypto was never a currency at all.  Just because someone says something is something doesn’t automatically make it that thing. People ARE exchanging crypto for currency, and actual goods, which is a lot of that battle, but that doesn’t make crypto a currency any more than beanie babies are a currency.  It could be argued that beanie babies have more real value than crypto because they are an actual object with an actual use.

Edited March 1, 2021 by Bombastinator

[Fnige]

7 hours ago, porina said:

I'm also struggling to see the point in this "digital euro"

So you can now say digeuro

[StDragon]

Go long on fabs? Jesus, how much more pressure will there by for crypto hardware to pull this off when nation-states are getting involved?

[Vishera]

44 minutes ago, Bombastinator said:

The follow up question would be WHY might they be “scared” of crypto?  The question is not answered.  The implication seems to be “because crypto weakens government control and is just better” but the other side of that one is “because crypto has serious scam problems and was never a hard currency” it could even be argued that crypto was never a currency at all.  Just because someone says something is something doesn’t automatically make it that thing. People ARE exchanging crypto for currency, and actual goods, which is a lot of that battle, but that doesn’t make crypto a currency any more than beanie babies are a currency.  It could be argued that beanie babies have more real value than crypto because they are an actual object with an actual use.

There are much better reasons to regulate crypto currencies: Criminals and terrorists like to use it,it's easy to get and use without the knowledge of law enforcement.

So crypto currencies are also used for ransom payments,money laundering,hiring hitmans,financial support for terrorists and more,

It's total anonymity makes it almost impossible to track such illegal transactions.

 

It's not about taking control of people,it's about safer and more stable currency that is more suitable for the average Joe.

[tikker]

1 hour ago, Bombastinator said:

The follow up question would be WHY might they be “scared” of crypto?  The question is not answered.  The implication seems to be “because crypto weakens government control and is just better” but the other side of that one is “because crypto has serious scam problems and was never a hard currency” it could even be argued that crypto was never a currency at all.

Fair point. I do think they are "scared" of crypto exactly because they have no control over it. Not only from a privacy point of view, but also supply. They can't print more nor take it out of commission. Bitcoin was meant to be a currency, but not the value store it is now to my knowledge. By know I think it only holds legacy value because it was "the first".

1 hour ago, Bombastinator said:

Just because someone says something is something doesn’t automatically make it that thing. People ARE exchanging crypto for currency, and actual goods, which is a lot of that battle, but that doesn’t make crypto a currency any more than beanie babies are a currency.  It could be argued that beanie babies have more real value than crypto because they are an actual object with an actual use.

Well it sort of does. A €0.50 coin is worth only €0.04 in materials, for example, yet it's worth €0.50 because we agreed on that. A currency is "a medium of exchange for goods and services." so crypto is a currency in that regard.

 

I do see the problem with crypto though. An unofficial currency came out of nowhere and suddenly made its way into the economy. Funnily enough I think it's a beautiful demonstration of economy though: things only have value because we attribute them value. In a way it is similar to your example where we'd decide beanie babies would be our medium of choice, hence becoming our currency. The other problem is that it's not issued by any official body and thus technically an illegal currency. At the same time companies have started accepting it as a form of payment so unofficially it has become sort of "official" and it's still tied to fiat for now, which puts it in a bit of a gray or at least delicate area I think.

 

50 minutes ago, Vishera said:

There are much better reasons to regulate crypto currencies: Criminals and terrorists like to use it,it's easy to get and use without the knowledge of law enforcement.

So crypto currencies are also used for ransom payments,money laundering,hiring hitmans,financial support for terrorists and more,

It's total anonymity makes it almost impossible to track such illegal transactions.

 

It's not about taking control of people,it's about safer and more stable currency that is more suitable for the average Joe.

Interesting read on that: https://blog.chainalysis.com/reports/2021-crypto-crime-report-intro-ransomware-scams-darknet-markets

It's still fairy low. Only 0.34% of transactions in 2020 was associated with criminal activity and most seems to have been just scams, but you have a good point. Even though normal cryptos are becoming relatively easy or easier to track with blockchain forensics and what not, privacy coins like Monero will certainly make it a lot harder. On the plus side it's becoming increasingly harder to convert crypto to fiat without ID verification. That should hopefully make it a bit better.

[Bombastinator]

Or

8 minutes ago, tikker said:

Fair point. I do think they are "scared" of crypto exactly because they have no control over it. Not only from a privacy point of view, but also supply. They can't print more nor take it out of commission. Bitcoin was meant to be a currency, but not the value store it is now to my knowledge. By know I think it only holds legacy value because it was "the first".

Well it sort of does. A €0.50 coin is worth only €0.04 in materials, for example, yet it's worth €0.50 because we agreed on that. A currency is "a medium of exchange for goods and services." so crypto is a currency in that regard.

 

I do see the problem with crypto though. An unofficial currency came out of nowhere and suddenly made its way into the economy. Funnily enough I think it's a beautiful demonstration of economy though: things only have value because we attribute them value. In a way it is similar to your example where we'd decide beanie babies would be our medium of choice, hence becoming our currency. The other problem is that it's not issued by any official body and thus technically an illegal currency. At the same time companies have started accepting it as a form of payment so unofficially it has become sort of "official" and it's still tied to fiat for now, which puts it in a bit of a gray or at least delicate area I think.

 

Interesting read on that: https://blog.chainalysis.com/reports/2021-crypto-crime-report-intro-ransomware-scams-darknet-markets

It's still fairy low. Only 0.34% of transactions in 2020 was associated with criminal activity and most seems to have been just scams, but you have a good point. Even though normal cryptos are becoming relatively easy or easier to track with blockchain forensics and what not, privacy coins like Monero will certainly make it a lot harder. On the plus side it's becoming increasingly harder to convert crypto to fiat without ID verification. That should hopefully make it a bit better.

or is it just a product? A fairly worthless one.  It’s the difference between a hard currency and a floating one.  With a hard currency there is an object: “this many grams of this metal”. Hard currencies had massive issues with availability though. It was referred to as “tight money”  Reference the famous “cross of gold speech” which heavily influenced the US dropping the gold standard for the dollar.  The dollar is still backed though.  It’s backed by the combined resources owned by the US government. So gold, silver, helium, etc..  crypto is backed by nothing at all. Plus it costs vast amounts of electricity to create.  If that electricity could be retrieved again that would be different, but it can’t.

Edited March 1, 2021 by Bombastinator

[thorhammerz]

A couple things come to mind:

1) Enforcement of deeply negative interest rates (hiding money in paper cash will no longer be an option)

 

2) Ability to enforce spending controls (e.g. this specific batch of coins can only be used to purchase certain goods / services)

 

3) Eventual elimination of middlemen (most notably, the banks, so they can eventually have a system where you interact with the central bank directly)

 

Welcome one and all, to a new age of financial repression .

[tikker]

19 minutes ago, Bombastinator said:

Or

or is it just a product? A fairly worthless one.  It’s the difference between a hard currency and a floating one.  With a hard currency there is an object: “this may grams of this metal”. Hard currencies had massive issues with availability though.  Reference the famous “cross of gold speech” which heavily influenced the IS dropping the gold standard for the dollar.  The dollar is still backed though.  It’s backed by the combined resources owned by the US government. So gold, silver, helium, etc..  crypto is backed by nothing at all. Plus it costs vast amounts of electricity to create.  If that electricity could be retrieved again that would be different, but it can’t.

Yeah you could see it as a product as you can just buy crypto, but since you can spend it in shops now, the difference compared to exchanging e.g. dollars for pounds and buying something with those is fading to me. With the exception that dollards and pounds are legal approved currencies of course. Also the dollar is a fiat money and hence not backed by anything. It's as worthless as crypto. Completely agree on the energy waste aspect of most proof of work cryptos.

11 minutes ago, thorhammerz said:

A couple things come to mind:

1) Enforcement of deeply negative interest rates (hiding money in paper cash will no longer be an option)

 

2) Ability to enforce spending controls (e.g. this specific batch of coins can only be used to purchase certain goods / services)

 

3) Eventual elimination of middlemen (most notably, the banks, so they can eventually have a system where you interact with the central bank directly)

 

Welcome one and all, to a new age of financial repression .

1 and 2 seem to be the basic gist already indeed. They don't want it to be a savings account and indeed give the option of charging interest for storing above a certain amount and the explicitely mention being able to exercise control over the money flow and preventing it to be used in (understandably, but still) non-euro countries. For now 3 seems to be out of the question, but it wouldn't surprise me if it would eventually happen.

[Bombastinator]

6 minutes ago, tikker said:

Yeah you could see it as a product as you can just buy crypto, but since you can spend it in shops now, the difference compared to exchanging e.g. dollars for pounds and buying something with those is fading to me. With the exception that dollards and pounds are legal approved currencies of course. Also the dollar is a fiat money and hence not backed by anything. It's as worthless as crypto.

1 and 2 seem to be the basic gist already indeed. They don't want it to be a savings account and indeed give the option of charging interest for storing above a certain amount and the explicitely mention being able to exercise control over the money flow and preventing it to be used in (understandably, but still) non-euro countries. For now 3 seems to be out of the question, but it wouldn't surprise me if it would eventually happen.

One used to be able to do that with cigarettes during especially violent periods during and just after world war 2.   Also not all shops take the stuff.  Fairly few actually.  Supply and demand is a thing.  There is demand for cryptocurrency.  Most of it is for illegal purpose though.  Buying drugs, evading taxes, hoarding wealth in areas which have limits on such, creating wealth that is portable and smuggling it, which mostly reference the others. 

Edited March 2, 2021 by Bombastinator

[tikker]

1 minute ago, Bombastinator said:

One used to be able to do that with cigarettes during especially violent periods during and just after world war 2.   Also not all shops take the stuff.  Fairly few actually. 

Oh yeah, didn't mean to imply it's a widely accepted form of payment. I'm just starting to see it pop up in more regular places now. Over here I noticed it incidentally for a shop where I usually buy my watercooling stuff and a food delivery company.

[Mling]

9 hours ago, Kroon said:

homogen

I believe the correct terminology is Globohomo, short for Globally homogeneous. Sounds like a socialist thing; the EU is taking over a service provided by the private sector.

[thorhammerz]

49 minutes ago, tikker said:

1 and 2 seem to be the basic gist already indeed. They don't want it to be a savings account and indeed give the option of charging interest for storing above a certain amount and the explicitely mention being able to exercise control over the money flow and preventing it to be used in (understandably, but still) non-euro countries.

Yeeep. But now with the prospect of say, enacting a -10% value per annum (spend-it-or-lose-it) regardless of where it's placed. Demographics are a cruel thing when it comes to shaping how economic systems live (and die...), and a large swathe of the world is about to learn, over the course of the next 5-10 years, how to make do with a future of "less".

 

Capitalism, socialism, fascism, communism, were all ism's based on the notion of "more" (with a few technical tweaks on who gets to decide who gets which part and how much of it). It's time to find some new "isms" (and the wars to go along with it)!

 

Quote

For now 3 seems to be out of the question, but it wouldn't surprise me if it would eventually happen.

 

I believe the central-banking jargon goes something along the lines of "we shall do such and such to increase the effectiveness in the transmission of monetary policy". One might liken this to cutting off the lizard's tail, while eliminating any functional middlemen who might otherwise impede the will of the state through their normal course of operations.

[COTG]

14 hours 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.

theres no actual finality when you transact with credit cards or other online measures. banks and intermediaries have to take on liabilities until the actual transaction is settled which usually takes a few days. Crypto enables instant finality and eliminates a ton of friction which should result in siginificant efficiency increases and decreased fees 

[descendency]

14 hours 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.

It cuts costs of transferring physical money and can cut on cost of transferring money globally. 

[n0stalghia]

Digital currency is just that, digital. It's not backed by anything. If anything happens - war, cataclysm, etc. - pixels are going to evaporate, while cash may devaluate, but at least will be there. Not a fan of the digitalization and very happy to not live in Sweden in light of that. Hell, what happens if there's a blackout?

 

People are forgetting that in the last 100 years there's been two major wars in Europe, nobody can say for sure there won't be a third one at some point. As we've seen with politics in the recent years, all it takes is one crazy guy to get elected 

[Spindel]

1 hour ago, n0stalghia said:

Digital currency is just that, digital. It's not backed by anything. If anything happens - war, cataclysm, etc. - pixels are going to evaporate, while cash may devaluate, but at least will be there. Not a fan of the digitalization and very happy to not live in Sweden in light of that. Hell, what happens if there's a blackout?

 

People are forgetting that in the last 100 years there's been two major wars in Europe, nobody can say for sure there won't be a third one at some point. As we've seen with politics in the recent years, all it takes is one crazy guy to get elected 

Now you are making straw man arguments. 

 

"What if there is a black out"?

 

What if there is a black out and you run out of cash?

 

Europe has had two major wars in the last century, but I would argue that FIAT money won't save you in that instance, gold/silver or tradable goods is what will save you. When you starve you can't eat money no matter if it's digital or paper/coins. 

[Kroon]

11 hours ago, Mling said:

I believe the correct terminology is Globohomo, short for Globally homogeneous. Sounds like a socialist thing; the EU is taking over a service provided by the private sector.

 

Then it would be Eoro-Homo for Eueopean homogeneous.  

 

And no its not a service to replace a private one.  There is simply no ONE payment solution in Europe at the moment and this is an attempt to solve that.  Remember that EU is 27 countries where services and products are suppose to be traded freely. Currently this is not happening due to bank and credit companies (Visa, EuroCard/MasterCard, etc) additional frees simply to trade over national borders (Specially internet transactions are expensive).  

 

Also noteworthy is that only 19 countries have Euro as currency, other 8 have their own currency. So this digital currency are also suppose to make life easier for those 8 countries and perhaps convince/ make it easier for some of them to join Euro.

 

When mailing a Swedish EU commissioner with some questions about this I got quite surprising answer.  Its the first step to cash-less Europe.  When Europe will become cash-less there must still be someway to easy transfer money between two people. 

 

[Kroon]

36 minutes ago, Spindel said:

"What if there is a black out"?

 

What if there is a black out and you run out of cash?

 

Europe has had two major wars in the last century, but I would argue that FIAT money won't save you in that instance, gold/silver or tradable goods is what will save you. When you starve you can't eat money no matter if it's digital or paper/coins. 

 

I haven't touch cash in at least 7 if not 10 years.  And even back then it was quite rare to have cash, some smaller bills and coins in the wallet to give to my children so they could buy glass in the summer, that's about it.   Talked to my son, 21 years old, and he remember cash but have no recollection ever handling cash himself. 

 

But you are 100% correct that in case of war its going to be back to the old days to trade gold/silver/hens/cows but at that point it will not matter if you traded in cash or digital before the war its all going to worthless anyway.

[Spindel]

19 minutes ago, Kroon said:

But you are 100% correct that in case of war its going to be back to the old days to trade gold/silver/hens/cows but at that point it will not matter if you traded in cash or digital before the war its all going to worthless anyway.

Even in Sweden during WW2 it was hard to get by with cash because of rationing. Being a farmer or knowing a farmer was what mattered because it gave you access to dairy, meat and grain (all where rationed during the war) that could be traded for other goods. 

[tikker]

48 minutes ago, Kroon said:

 

I haven't touch cash in at least 7 if not 10 years.  And even back then it was quite rare to have cash, some smaller bills and coins in the wallet to give to my children so they could buy glass in the summer, that's about it.   Talked to my son, 21 years old, and he remember cash but have no recollection ever handling cash himself. 

 

But you are 100% correct that in case of war its going to be back to the old days to trade gold/silver/hens/cows but at that point it will not matter if you traded in cash or digital before the war its all going to worthless anyway.

Using cash is rare for me nowadays, but I still like to keep some around and on me just in case. There have been the rare occasions where the payment network was down or I forgot my card.

28 minutes ago, Spindel said:

Even in Sweden during WW2 it was hard to get by with cash because of rationing. Being a farmer or knowing a farmer was what mattered because it gave you access to dairy, meat and grain (all where rationed during the war) that could be traded for other goods. 

I'd figure in an apocalyptic(ish) scenario like that money would indeed quickly loose value in favour of services or other goods that have actual use.

[Doobeedoo]

My country is 8y in EU and still not using € haha. This so called digital though, yeah not sure if and when that would come. I mean, I like the general idea of getting rid of physical dirty money and just use cards/phones rather.

[Nowak]

If only crypto wasn't so wasteful.

[Monkey Dust]

11 hours ago, n0stalghia said:

Digital currency is just that, digital. It's not backed by anything. If anything happens - war, cataclysm, etc. - pixels are going to evaporate, while cash may devaluate, but at least will be there. Not a fan of the digitalization and very happy to not live in Sweden in light of that. Hell, what happens if there's a blackout?

 

People are forgetting that in the last 100 years there's been two major wars in Europe, nobody can say for sure there won't be a third one at some point. As we've seen with politics in the recent years, all it takes is one crazy guy to get elected 

Fiat currencies can and do collapse, and then the coins and notes are worthless. In the event of societal collapse, if you want to hold onto wealth you need precious metals, or if you have the space maybe fine art. In the short term what you'll probably want is goods you can barter with and ideally tools and access to agricultural land.

 

In the event of a blackout the tills/registers go down, so most places won't be able to even take cash.

[Brooksie359]

On 3/1/2021 at 9:54 AM, tikker said:

Interesting angle. I hadn't considered that yet.

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:

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.

That not even true. Money you have in the bank is still money and is backed by the government as legal tender. Its why you can go to a bank and take out cash in the first place. Not to mention that in the US most banks are insured by the government so that even if the bank goes under you still get your money up to I think it was 100k last time I checked. Anyways the notion that money in the bank isn't backed by anything is absolutely ridiculous. 

[tikker]

12 hours ago, Brooksie359 said:

That not even true. Money you have in the bank is still money and is backed by the government as legal tender. Its why you can go to a bank and take out cash in the first place. Not to mention that in the US most banks are insured by the government so that even if the bank goes under you still get your money up to I think it was 100k last time I checked. Anyways the notion that money in the bank isn't backed by anything is absolutely ridiculous. 

I thought it was clear, but I guess I should have added /s to that first sentence as it was more a joke.

 

12 hours ago, Brooksie359 said:

Anyways the notion that money in the bank isn't backed by anything is absolutely ridiculous. 

Maybe I should have been a bit more specific. With backed I refer to the value aspect. Fiat money is not backed by anything in the sense that there is no gold or other valuable material tied to it. Its value comes from it being legal tender.