Benefits of the European CBDC
3 min readThe digital euro is taking on more and more concrete forms. The European Central Bank (ECB) is officially examining the benefits and implementation of the project until October. However, industry experts are already certain that the CBDC is coming. At the end of last month, the EU Commission made proposals as to what the legal basis for the digital euro could look like. Although the document addresses various public concerns, critics remain skeptical.
“The world is changing”, so commented Fabio Panetta (ECB) and Valdis Dombrovskis (EU Commission) drafted the law at the end of June. In 42 paragraphs, the Commission made the prelude to a legal framework for the digital euro, from issuance and control to data protection. The member states now have until August 11th to provide feedback. The deadline for the EU Commission is September 7th.
Digital euro: more anonymous than expected?
A major criticism of the CBDC revolves around the issue of privacy. Negative examples like China deter citizens from the idea of a supranational digital European currency. In a survey by the ECB in April 2021, 43 percent of those surveyed made privacy the top priority with the digital euro and received the support of Finance Minister Christian Lindner (FDP).
The Commission addresses these concerns in its draft. The digital euro should have an offline function as well as an online function. Up to a certain threshold, citizens could then make payments without the ECB collecting personal data. Only data such as the transaction value would be forwarded. And even with online payments, the central bank should only collect the most necessary information.
In addition, the digital euro should not be understood as “programmable money”. The ECB should not have any influence on the purposes for which the CBDC is used, writes the Commission. However, this does not rule out programmable payments, which can be processed automatically by fulfilling various conditions, similar to smart contracts.
Benedikt Faupel from the Bitkom digital association also welcomes the latter. He told BTC-ECHO it was a “right and important” move. And further: “However, this idea must be consistently pursued in order to ensure real interoperability.” Blockchain technology could offer one possibility. However, this has not yet been mentioned in the draft.
Where is the benefit for the end user?
The question of the benefit for the end user remains unresolved. The privacy features could incentivize citizens to use the CBDC. Nevertheless, the competition with payment solutions from Google, Apple, Paypal and Co. is great. FDP member of the Bundestag Frank Schäffler criticized BTC-ECHO: “The ECB has not yet sufficiently explained where the benefits of a digital euro for the citizens of Europe should lie. Payment transactions have been working well so far. There are enough private providers for this.” The introduction of the CBDC is like “open-heart surgery”, according to the politician.
In general, there are many unanswered questions about the project. Experts do not see the conclusion of the deliberations until after the European elections in the coming year. The EU Commission plans to introduce the CBDC as early as 2026. However, it remains questionable whether the schedule can be met.
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