The ECB and the European Commission held a conference on the digital euro on Monday. The contours of this project disturb the ecosystem, especially on the issue of personal data.
The European Commission (EC) and the European Central Bank (ECB) organized on Monday a major conference on the future of the digital euro, entitled “Towards a legislative framework enabling a digital euro for citizens and businesses”. The European Commission has specifically confirmed that it will make a legislative proposal during the first quarter of 2023 for this digital version of the eurozone currency.
“I look forward to” this legislative proposal, ECB President Christine Lagarde said at the conference. For the latter, such a proposal would send a “strong signal of political support” for the ECB’s projects.
Type “digital euro into law”
The ECB and the EC have already been examining the political, legal and even technical issues for a digital euro for several months. This proposal “will enshrine the digital euro in law and regulate its essential aspects,” said Vladimir Dombrovskis, the EC’s executive vice-president.
The digital euro will not replace other payment systems (cash or digital payments), specifies the ECB. Furthermore, the digital euro “should be used primarily as a means of payment and not become a financial investment instrument.” Finally, it would be “free” and usable by everyone within the euro area.
For Europe, a digital euro would be “better” than cryptocurrencies
Despite this high-profile meeting, it will not be until October 2023 that Europe will decide whether or not to move forward with such a project, which would not see the light of day until 2026 or even 2027 after some tests . By then, the crypto ecosystem, which is very critical to this project, will have determined its course.
In a question/answer section for this project, the ECB asked this unusual question: “why would a digital euro be better than stablecoins and crypto-assets?”. And his answer is just as important when you know cryptoecosystems’ commitment to privacy.
“The digital euro would be a central bank currency. This means that it would be backed by a central bank, created to meet the needs of citizens: it would be risk-free and respect privacy and data protection,” we might read.
The reactions of the ecosystem after this meeting were not long in coming. Vladimir Dombrovskis’ speech is not “reassuring”, says Alexandre Stachchenko, co-founder of Blockchain Partner and director of blockchain and crypto at KPMG France.
“The Slippery Slope”
“We will discuss a facility that is presented as essential by the European Commission when it is not even defined and that we will not have any feasibility information before 2025-26. The fact that the only country that has preserved this currency format, i.e. China, should alert us to the slide that we are unfortunately taking, under the pretext of an urgent digitization of society”, the latter assesses.
For his part, Gilles Cadignan, co-founder of Woleet, recalls that the digital euro project was part of a reaction to the Libra cryptocurrency project by Meta (formerly Facebook). “But Libra was very easily destroyed in the beginning by this same EU for the simple reason that a private currency initiative by a centralized actor, however powerful, is easily opposed by sovereign states”, the latter points out.
“The EU was (wrongly) much more afraid of Libra than of Bitcoin, but today central banks and the ECB in the first place are beginning to realize that Bitcoin is a serious threat that must be taken into account anyway. The Euro central bank aims to be the institutional alternative to Bitcoin and its cryptocurrency anarchy, but since the ECB can’t expose it as such, the announcements struggle to explain the real stakes or even utility of this MNBC [monnaie numérique de banque centrale, NDLR] when most of the euros we handle are already in digital form”, he says.
For the latter, the problem also lies in the violation of users’ privacy. “Unlike cash, with central bank digital currencies we will be able to know who is using the money and why! 1984 was a little late, but here we are for good.” For its part, the ECB aims to be clear on the issue of user privacy.
“The Eurosystem has no interest in collecting payment data from individual users, tracking payment behavior or sharing such data with government agencies or other public institutions,” the ECB questions/answers state.