The ECB and the European Commission held a conference on the digital euro on Monday. The contours of this project worry the ecosystem, particularly on the issue of personal data.
The European Commission (EC) and the European Central Bank (ECB) organized a major conference on the future of the digital euro on Monday, entitled “Towards a legislative framework enabling a digital euro for citizens and businesses”. The European Commission has notably confirmed that it will make a legislative proposal during the first quarter of 2023 on this digital version of the currency of the euro zone.
“I am very much looking forward to” this legislative proposal, said ECB President Christine Lagarde at the conference. For the latter, such a proposal would send a “strong signal of political support” to the ECB’s projects.
Inscribe “the digital euro in the law”
The ECB and the EC have already been examining political, legal and even technical questions about a digital euro for several months. This proposal “will enshrine the digital euro in law and regulate its essential aspects”, indicated Vladimir Dombrovskis, the Executive Vice-President of the EC.
The digital euro would not replace other payment systems (cash or digital payment), specifies the ECB. Furthermore, the digital euro “must 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 zone.
For Europe, a digital euro would be “better” than cryptos
Despite this meeting with great fanfare, it is only in October 2023 that Europe will decide whether or not to move forward on such a project, which would not see the light of day until 2026 or even 2027 after several tests. By then, the crypto ecosystem, which is very critical of this project, will have charted its course.
In a question/answer section on 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 the commitment of the crypto ecosystem to privacy.
“The digital euro would be a central bank currency. This means that it would be backed by a central bank, designed to meet the needs of citizens: it would be risk-free and would respect privacy and data protection”, perhaps we read.
The reactions of the ecosystem following 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 cryptos at KPMG France.
“The Slippery Slope”
“We are going to have a discussion on an object that is presented as essential by the European Commission when it is not even defined and that we will not have any feasibility info before 2025-26. The fact that the only country to having retained this format of currency, that is China, should alert us to the slippery slope that we are unfortunately taking, under the pretext of an urgent digitization of society”, considers the latter.
For his part, Gilles Cadignan, the co-founder of Woleet, recalls that the digital euro project was part of a reaction to the Libra cryptocurrency project from Meta (formerly Facebook). “But Libra was nipped in the bud quite easily by this same EU for the simple reason that a private currency initiative from a centralized actor, however powerful, is easily countered by sovereign states”, specifies this last.
“The EU was (wrongly) much more afraid of Libra than of Bitcoin, but today central banks and the ECB in the first place are starting to realize that Bitcoin is a serious threat that must be considered anyway. The central bank euro aims to be the institutional alternative to Bitcoin and its cryptocurrency anarchy, but since the ECB cannot really expose it as such, the announcements struggle to explain the real stakes or even the usefulness of this MNBC [monnaie numérique de banque centrale, NDLR] when already the majority of the euros that we handle are in digital form”, he indicates.
For the latter, a problem also lies in the invasion of the privacy of users. “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 intends to be clear on the issue of user privacy.
“The Eurosystem has no interest in collecting payment data from individual users, in tracking payment behavior or in sharing such data with government agencies or other public institutions,” the questions read. /responses from the ECB.