European Central Bank (ECB) Member of the Executive Board, Fabio Panetta, has issued a speech on a central bank digital currency (CBDC) advocating on behalf of issuing a digital Euro.
Europe, like many other jurisdictions around the world, is reviewing the pros and cons of an issuance of a CBDC. One of the big concerns of interested individuals is the potential for privacy abuses and handing over more control to central governments. China, already testing a digital yuan (e-CMB) has openly stated its interest in using a CBDC to influence policy.
Panetta believes that the EU can issue a digital Euro while safeguarding against these privacy concerns.
Panetta outlines his four pre-requisites for a CBDC:
- Legal tender status – a digital Euro must hold the same characteristics as a physical Euro
- Privacy – a digital Euro would be “unable to see the personal details of its users.”
- Cost – a digital Euro could be utilized free of charges
- Tools “needed to maintain the equilibrium between private money – like commercial bank deposits and central bank money.”
Panetta says the ECB is confident that an “equilibrium” can be maintained.
He also takes a shot at stablecoins, using PayPal’s recently announced digital dollar, PYPL, as only serving the company as its goal is to gain market share. TO quote Panetta:
“… unlike the stablecoins issued by big techs, the digital euro would be distributed by banks and other payment service providers, which would maintain their relationship with their customers. And the ECB is actively cooperating with European payment service providers and other stakeholders to ensure that the digital euro would be fully compatible with existing payment tools and attractive to all. In particular, as mentioned above, the proposed design of the digital euro would guarantee the highest level of privacy for digital payments.”
Panetta believes that a digital Euro is “money fit for the digital age.”
While Panetta is appears to be absolutely confident government authorities will not abuse their vantage point in issuing a digital Euro – the populace may not have the same confidence. Too many examples of central authorities straying beyond their stated mission show taht time and again, the government does not always get things right.
At the same time, a private issuer of stablecoins – basically an update to current, private payment rails, may offer a more private and secure physical fiat if issuers are required not to retain certain data points under punishment of the law.
The ECB is completing a previousl announced review of CBDCs with the investigation phase in its final stage with expectations for the report to be released next month.
