Europe Flirts with Release of Digital Euro Cryptocurrency
Digital Euro Cryptocurrency: The European Central Bank suggests the launch of digital currency could be a viable response to Bitcoin and Coronavirus, some aren’t so sure.
Cryptocurrencies have represented a sincere disruption to the central banking systems since their introduction in 2009. In the aftermath of one of the most devastating global economic crises to date, cryptocurrencies offered a better, more inclusive and transparent system of global commerce. One that wasn’t subject to manipulation or discrimination. A fully fungible, borderless, decentralized payment system that was available to anyone who had access to the internet.
While in their adolescence, cryptocurrencies struggled to find traction in a world that wasn’t ready to part ways with traditional finance, they have come into their own in recent years, turning heads with worldwide adoption and engagement. To the point where, in some countries, turning toward a crypto trading platform has become preferable to heading to the bank. A truth that seems to have central banking institutions, and the governments that control them, frantically vying for an on-ramp into the space.
To the point where even Europe is now pressing for its own version of digital currency– both to protect the system that exists, shore it’s debts, and contend with some of the biggest names in crypto we know.
Rise of CBDCs
The Eurozone is definitely not the only major player in the world’s economy that has released a digital currency, as China has already begun pilot programs with their digital yuan. Having properly celebrated the year of the Ox by giving 200,000 of residents in Beijing and Suzhou roughly $31 of the central bank digital currency (CBDC).
However, China is not the only country that has been developing plans for release of a national digital currency, as Cambodia, Russia, and Japan (among others) have all begun to seriously consider the release of their own digital currencies. Which makes sense, particularly as cash has been crashing for some time. A phenomenon that has only been encouraged in the wake of the global pandemic. By 2006, 80% of US banks had already embraced and provided their customers with digital banking infrastructure. An estimated 176 million people in the US carry credit cards, a system of digital value that in some ways echoes the valuation of cryptocurrencies.
So as fintech and those that interact with their money in a digital way continue to grow, prices for major cryptos like Bitcoin and Ethereum continue to skyrocket, and everyone begins using cash less often– it only makes sense for countries to seriously consider a digital currency of their own.
Deutsche Bank has long been a promoter of creating a digital euro, hoping to gain a spot at the table and maintain relevant monetary sovereignty. What has become newsworthy is that the European Central Bank (ECB) seems to not only agree, but has decided without question that a digital euro will be released and integrated into the existing financial systems as a “complement” to cash. Further stating that the new token would be “accessible to all”, and would “support the digitization of the European economy and actively encourage innovation in retail payments.”
The ECB also seems to suggest that this digital euro will become a better local option for people who wish to engage with cryptocurrencies themselves, creating a hopeful response to the popularity of major cryptocurrencies like Bitcoin and Ethereum. The release also proposes that these types of crypto currencies could “undermine financial stability and monetary sovereignty.” And if they’re talking about the monetary sovereignty of the state, as opposed to the people themselves, they might be right.
Many detractors of the proposal for a digital euro suggest that it could be the watershed event that leads to the destruction of centralized banking systems as we know it. Cryptocurrencies were designed to exist outside of fiat devaluation and political manipulation of currencies, creating a paradigm in which currency is truly democratized and accessible by all. Fully borderless and virtually fee-less, cryptocurrencies and DeFi have long set their sights on offering a viable alternative to national currencies.
Concerns Over Digital Euro
Which is a disruptive concept that cryptocurrencies have long been slave to. Which is one of the reasons why few countries agree to look at them as legal tender, instead classifying cryptos as assets. Suggesting that central banking authorities are well aware of the risks that crypto adoption pose for their tenuous grasp on monetary control.
So, taking the fundamental structure of cryptos, nationalizing and centralizing it, seems to be a reasonable move for policy makers. Hoping instead to funnel crypto interest back into centralized systems, and labelling crypto as an asset, making it essentially cost prohibitive for the average (or unbanked) citizen to engage with. Each move a seemingly calculated undertaking to remove generalized public access to tokens, essentially forcing their hands back to centralized banking practices.
So as concerns rise in the traditional financial sector of the havoc these CBDCs could wreak on the existing system, some crypto experts are concerned as well– as fear of yet another paradigm shift continues to mount.