DIE European Central Bank Want to concretize their digital euro plan. Fabio Panetta, a member of the European Central Bank’s board of directors, warned Thursday not to over-expect. “From day one, the digital euro cannot meet all expectations in all aspects. I want to emphasize this very clearly,” the Italian told a committee of the European Parliament. The European Central Bank (ECB) hopes to determine the core attributes of the digital euro in a two-year research phase. According to Panetta, the goal is to create an immediately useful digital currency on the one hand, and on the other hand, it can be further developed “within a reasonable time frame.”
An advanced working group on digital central bank currencies is working to determine use cases and design options for the digital euro. After this phase, technical solutions will be reviewed, Panetta said: “We assume that we will narrow down the design-related decisions in early 2023 and create a prototype in the next few months,” he added.
Weidman had been cautiously criticized
In the past week, the governor of the Bundesbank Jens Weidman Be cautious about criticizing the digital euro. You don’t have to introduce all its features at once. You must see opportunities, but also risks. It may make sense to proceed step by step, initially equipping the digital euro with certain attributes that allow important uses, and then other features can be added. In the Bundesbank’s survey, more and more people said that they can imagine using the digital euro. But in the spring, it is still only about 40%.
The key to the problem is anonymity, Weidman said: “One thing is clear: the digital euro will not provide the anonymity of cash.” After all, digital payments will always leave traces. “In addition, the authorities must be able to track transactions within the framework required by the law so that they can resist and punish illegal activities such as money laundering.”
In July, the European Central Bank decided to study the digital euro project in depth. Many details are still unclear, or at least not yet finalized. Preparations now begin, with a two-year investigation phase, followed by a three-year implementation phase. Therefore, the digital euro can be launched in about five years.On the one hand, the central bank wants to respond to the plans of other countries such as China, and the latter wants to introduce digital currencies, but on the other hand, it also wants private digital currencies, such as Bitcoin Or Facebooks Diem will not leave the field.
Many details have not been clarified
Citizens are expected to receive digital wallets or “wallets” applications from banks, on which they can store digital euros. The central bank has not yet decided on the details. Fabio Panetta, member of the Executive Committee of the European Central Bank, and Ulrich Bindseil, director general of market infrastructure and payment transactions, highlighted several technical possibilities at the press conference at the time. However, the European Central Bank may not use blockchain like Bitcoin. For example, Italy’s existing real-time transmission system TIPS can provide the technical basis. The payment speed will be high. However, economists warned that the demand for the new digital currency should not be reduced so much that it would become the “second PayPal”.
The advantage of consumers should be that they have obtained “digital central bank currency”, which, like cash, is a direct claim against the central bank. If the home bank goes bankrupt, the digital euro will be safe. In order that not everyone withdraws money from banks and converts them into digital euros, especially in countries with weak banking systems, there should be an upper limit on how many digital euros can be stored in each person’s wallet. In a working paper by European Central Bank expert Bindseil, the possible upper limit is 3,000 euros. If the amount on the wallet exceeds this limit, the funds should flow into the bank account. In addition, using digital euros to make micropayments on the Internet should be cheaper than before.
Initially, the digital euro was not without controversy in the management committee. The French are particularly worried that the digital currencies of American companies such as Facebook may weaken the power of European monetary institutions. They want to deal with this through the European Central Bank’s response today, not tomorrow. On the other hand, the governor of the Bundesbank, Jens Weidmann, warned that safety precedes speed on this issue. He also put forward the concept of regulatory policy that the central bank should not stifle private initiatives in the field of digital payments in the bud. In addition, the impact on the banking system must be carefully reviewed.
The digital euro is also controversial among bank citizens and financial experts. In a survey conducted by the European Central Bank, 8,000 citizens participated, 47% of which were from Germany, which specifically mentioned the issue of anonymity: people were worried that the digital euro could be used to formally track all currency movements. The European Central Bank pledged not to abolish cash. “In any case, the digital euro should supplement rather than replace cash,” Panetta emphasized many times. But of course the central bank cannot rule out possible repression in daily business.
